Question

Transactions for Hurricane Company during 2018:

a) On Oct 1, 2018, Hurricane lends $9,000 to another company. The other company signs a note indicating principal and 12% interest will be paid to Hurricane on Sep 30, 2019.

b) On Nov 1, 2018, Hurricane pays its landlord $4,500 representing rent for the months Nov-Jan. The payment is debited to Prepaid Rent for the entire amount.

c) On Aug 1, 2018, Hurricane collects $13,200 in advance from another company that is renting a portion of Hurricane's factory. The $13,200 represents one year's rent and the entire amount is credited to Deferred Revenue.

d) Depreciation on machinery is $5,500 for the year.

e) Salaries for the year earned by employees but not paid to them or recorded are $5,000.

f) Hurricane begins the year with $1,500 in supplies.

During the year, the company purchases $5,500 in supplies and debits that amount to supplies. At year-end, supplies costing $3,500 remain on hand.

Record adjusting entries for Dec 31, 2018. No financial statements were prepared during the year and no adjustments entries were recorded.

Answer 1

Answer and Explanation:

Hurricane Company

a. Interest Revenue = Face Amount x Interest Rate x Time Period

9000 x .12 x 3/12

=$270

b.4500/ 3 =$1,500/month

Amt Used up/Month x numbers of Months used up = $ Amt of Expense

1500 x 2 = 3000

c.

Amount Received in Advance = $ Amt to be Earned/Month numbers of Month Cash is For

13200/12 = 1100/months

$ Amt to be Earned/Month x numbers of Month Passed = Total Amount Earned

1100 x 5 = 5500

d. Beg Supplies + Purchase of Supplies - End Supplies = Supplies Used

1500 + 5500 – 3500 = 3500

ADJUSTING Journal Entries

12/31

Dr Interest Receivable270

Cr Interest Revenue270

Dr Rent Expense3000

Cr Prepaid Rent3000

Dr Deferred Revenue5500

Cr Service Revenue5500

Dr Salaries Expense5000

Cr Salaries Payable5000

Dr Depreciation Expense5500

Cr Accumulated Expense 5500

Dr Supplies Expense3500

Cr Supplies3500