Question

A review of the ledger of Skysong, Inc. at December 31, 2022, produces the following data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $13,376. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2021, for $8,448. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2022, for $6,336. This policy has a term of 2 years. 2. Unearned Rent Revenue $377,520. The company began subleasing office space in its new building on November 1, 2022. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. Date Nov. 1 Dec. 1 Term (in months) 9 Monthly Rent $4,400 $7.480 Number of Leases 5 4 6 3. Notes Payable $35,200. This balance consists of a note for 6 months at an annual interest rate of 9%, dlated November 1. Interest will be paid at note maturity. 4. Salaries and Wages Payable $0. There are 8 salaried employees, Salaries are paid every Monday for the current week. 5 employees receive a salary of $528 each per week, and 3 employees earn $620 each per week. Assume December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December. Prepare the adjusting entries at December 31, 2022. (Credit account titles are automatically indented when the amount is entered. Do

Answer 1

Adjusting Entries:

No.	Date	Account titles and explanation	Debit	Credit
1	Dec. 31	Insurance expense	$5,984
		Prepaid insurance		$5,984
		[To record insurance expense]
2	Dec. 31	Unearned Rent Revenue	$61,600
		Rent Revenue		$61,600
		[To record revenue earned from Unearned]
3	Dec. 31	Interest expense	$528
		Interest payable		$528
		[To record accrued interest]
4	Dec. 31	Salaries and wages expense	$1,800
		Salaries and wages payable		$1,800
		[To record accrued salaries and wages expense]

Calculations:

1.

Insurance expense
Policy	Calculations	Amount
Policy B4564	[$8,448 x 1/3]	$2,816
Policy A2958	[$6,336 X 1/2]	$3,168
Total		$5,984

2.

Rent Revenue
Revenue earned for	x	Monthly Rent	x	Number of leases	=	Rent expense
2 months [Nov 1 to Dec 31]	x	$4,400	x	5	=	$44,000
1 month [Dec 1 to Dec 31]	x	$4,400	x	4	=	$17,600
Total						$61,600

3.Interest expense [Nov 1 to Dec 31] = $35,200 x 9% x 2/12 = $528

4.

Salaries and wages expense
Type	Calculations	Total
For 5 employees	[$528 x (2 days / 5 days x 5 employees]	$1,056
For 3 employees	[$620 x (2 days / 5 days) x 3 employees]	$744
Total		$1,800

*Assumed that 5 days work week.