Question

A) Depreciation on the company's equipment for 2017 is computed to be $16,000.

b) The Prepaid Insurance account had a $9,000 debit balance at December 31, 2017, before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $900 of unexpired insurance coverage remains.

c) The Office Supplies account had a $540 debit balance on December 31, 2016; and $2,680 of office supplies were purchased during the year. The December 31, 2017, physical count showed $637 of supplies available.

d) One-fourth of the work related to $11,000 of cash received in advance was performed this period.

e) The Prepaid Insurance account had a $5,100 debit balance at December 31, 2017, before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $4,200 of coverage had expired.

f) Wage expenses of $5,000 have been incurred but are not paid as of December 31, 2017.


Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each of these separate situations.

Answer 1

Adjusting Journal Entries:

a) Debit Depreciation Expense - Equipment $16,000

Credit Accumulated Depreciation - Equipment $16,000

To record depreciation charge for the year.

b) Debit Insurance Expense $8,100

Credit Insurance Prepaid $8,100

To record insurance expense for the year.

c) Debit Office Supplies Expense $2,583

Credit Office Supplies Account $2,583

To record office supplies used for the year.

d) Debit Deferred Revenue $2,750

Credit Service Revenue $2,750

To record revenue for work done this period.

e) Debit Insurance Expense $4,200

Credit Prepaid Insurance $4,200

To record insurance expense for the year.

f) Debit Wages Expense $5,000

Credit Wages Payable $5,000

To record unpaid wages as of December 31, 2017.

Step-by-step explanation:

Adjusting journal entries are entries made in the journal to accrue expenses and revenue in line with the accrual concept and the matching principle of U.S. GAAP. The concept and principle require that expenses and revenue are matched in the period they were incurred and not when they were actually paid for or received.