Question

1.Use the information to prepare adjusting entries as of December 31.

2.Prepare journal entries to record the first subsequent cash transaction in January of the next year for parts c and e.
Arnez Company’s annual accounting period ends on December 31. The following information concerns the adjusting entries to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Building; Accumulated Depreciation—Building; Salaries Payable; Unearned Revenue; Rent Revenue; Salaries Expense; Office Supplies Expense; Insurance Expense; and Depreciation Expense—Building.

Answer 1

The student's question involves formulating adjusting entries at the end of the accounting period and the subsequent recording of cash transactions in the new year for a company. The process includes recognizing expenses and revenues that pertain to the current period and adjusting asset accounts accordingly.

Step-by-step explanation:

The question pertains to creating adjusting entries at the end of an accounting period and subsequently recording the first subsequent cash transactions in the following year. Though the specific adjustments were not provided in the student's request, common year-end adjustments involve recognizing unrecorded expenses and revenues that have been earned but not invoiced, as well as adjusting asset accounts through depreciation and adjusting for any prepaid expenses that have now been incurred.

For example, if Arnez Company had unpaid salaries at year-end, an adjusting entry on December 31 would debit Salaries Expense and credit Salaries Payable. In January, when the salaries are paid, the journal entry would debit Salaries Payable and credit Cash.

Similarly, if there is any unearned revenue that has been earned by the end of the year, an adjusting entry would debit Unearned Revenue and credit Rent Revenue. When the associated cash is received in January, the subsequent entry would be to debit Cash and credit Accounts Receivable if the customer is billed or maintain the entry if cash was received in advance.