Question

Arnez Company's annual accounting period ends on December 31, 2019. The following information concerns the adjusting entries to be recorded as of that date. a. The Office Supplies account started the year with a $3,625 balance. During 2019, the company purchased supplies for $14,971, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2019, totaled $3,190. b. An analysis of the company's insurance policies provided the following facts. Policy А B с Date of Purchase April 1, 2017 April 1, 2018 August 1, 2019 Months of Coverage 24 36 12 Cost $ 9,600 8,424 7,200 The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) c. The company has 15 employees, who earn a total of $3,000 in salaries each working bay. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2019, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2020. d. The company purchased a building on January 1, 2019. It cost $745,000 and is expected to have a $45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $23,333. e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $2.800 per month, < Prey 4 of 5 Next > search O E

Answer 1

Answer-

Arnez Company
Adjusting Journal Entries - Dec 31
S. no.	Date	Accounts and explanation	Debit	Credit
a.	31-Dec	Office Supplies Expense Dr ($3625+$14971-$3190)	$15,406
		To Office Supplies		$15,406
		(To record cost of supplies used)
b.	31-Dec	Insurance Expense Dr	$7,008
		To Prepaid Insurance		$7,008
		[A = $9600/24*3 = $1200 B = $8424/36*12 = $2808 C = $7200/12*5 = $3000 ]
		(To record annual insurance coverage cost)
c.	31-Dec	Salaries and wages Expense Dr [$3,000*2]	$6,000
		To Salaries and wages payable		$6,000
		(To record accrued but unpaid wages)
d.	31-Dec	Depreciation Expense Dr	$23,333
		To Accumulated Depreciation- Building		$23,333
		(To record annual depreciation expense)
e.	31-Dec	Rent Receivable Dr	$2,800
		To Rent Earned		$2,800
		(To record earned but unpaid december rent)
f.	31-Dec	Unearned rent Dr (figure is not given in the question)
		To Rent Earned

Solution 2:

Journal Entries
S. no.	Date	Accounts and explanation	Debit	Credit
c.	06-Jan	Salaries and wages payable Dr ($3,000*2)	$6,000
		Salaries and wages expense Dr ($3,000*3)	$9,000
		To Cash		$15,000
		(To record payment of accrued and current salaries)
e.	15-Jan	Cash Dr	$5,600
		To Rent Receivable		$2,800
		To Rent Earned		$2,800
		(To record receipt of 2 months rent)

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