Question

Amez Company's annual accounting period ends on December 31 . The following information concerns the adjusting entries to be recorded as of that date. a. The Office Supplies account started the year with a $3,200 balance. During the year, the company purchased supplies for $13,216, which was added to the Office Supplies account. The inventory of supplies available at December 31 totaled $2,816. b. The Prepaid insurance account had a $30,192 debit balance at December 31 before adjusting for the costs of any expired coverage for the yeat. An analysis of prepaid insurance shows that $21,735 of unexpired insurance coverage remains at yearend. c. The company has 15 employees, who earn a total of $2,550 in salaries each working day. They are paid each Monday for their work in the five-day wotkweek ending on the previous Friday. Assume that December 31 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 of next yeat. d. The company purchased a bullding at the beginning of this year it cost $660,000 and is expected to have a $45,000 salvage value at the end of its predicted 30 -year life. Annual depreciation is $20,500. e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3.400 per month. starting on November 1 The rent was paid on time on November 1 , and the amount recelved was credited to Rent Revenue: However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 31 f. On November 1, the company rented space to another tenant for $3,080 per month. The tenant paid five months' rent in advance on that date. The payment was recorded with a credit to the Unearned Revenue account Assume no other adjusting entries ate made during the year. 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 cand e.

Answer 1

1. Adjusting entries: a) $10,400 Office Supplies Expense, b) $8,457 Insurance Expense, c) No entry, d) $20,500 Depreciation Expense, e) $3,400 Rent Receivable. 2. Journal entries in January: c) $8,500 Salaries and Wages Expense, e) $6,800 Rent Receivable.

Step-by-step explanation:

1. Adjusting entries as of December 31:

1. Entry a: Debit Office Supplies Expense for $10,400 and Credit Office Supplies for $10,400 to record the supplies used during the year, calculated as $13,216 (Purchases) - $2,816 (Inventory) = $10,400 (Expense).
2. Entry b: Debit Insurance Expense for $8,457 ($30,192 - $21,735) and Credit Prepaid Insurance for $8,457 to record the expired insurance coverage.
3. Entry c: No adjusting entry is required since the employees' salaries have been accounted for and will be paid on January 6 of the following year.
4. Entry d: Debit Depreciation Expense for $20,500 and Credit Accumulated Depreciation - Buildings for $20,500 to record the annual depreciation on the building.
5. Entry e: Debit Rent Receivable for $3,400 and Credit Rent Revenue for $3,400 to record the December rent receivable from the tenant.

2. Journal entries for the first subsequent cash transactions in January:

1. Entry parts c and e: Debit Salaries and Wages Expense for $8,500 ($2,550 x 2 working days) and Credit Accounts Payable for $8,500 to record the wages payable to employees for the first two days of the following year.
2. Entry part e: Debit Rent Receivable for $6,800 ($3,400 x 2 months) and Credit Rent Revenue for $6,800 to record the January rent receivable from the tenant who paid five months' rent in advance.