Question

Ricardo Construction began operations on December 1. In setting up its accounting procedures company decided to debit expense accounts when it prepays its expenses and to credit revenue accounts. Prepare journal entries for items a through d and the ad when customers pay for services in advance just and ng entries as of its December 31 period-end for items e through g. (Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Interest Receivable; Supplies; Prepaid Engpeme in erred Bp nKemodeling Fees: Remodeling Fees Earned Supplies Expense Expense; Interest Expense.)a. Supplies are purchased on December 1 for $2,000 cash.b. The company prepaid its insurance premiums for $1,540 cash on December 2c. On December 15, the company receives an advance payment of $13,000 cash from a customer for remodeling work.d. On December 28, the company receives $3,700 cash from another customer for remodeling work to be performed in Januarye. A physical count on December 31 indicates that the company has $1,840 of supplies available.f. An analysis of the insurance policies in effect on December 31 shows that $340 of insurance had expired.g. As of December 31, only one remodeling project has been worked on and completed. The s5,570 fee for this project had been received in advance and recorded as remodeling fees earned

Answer 1

Date Account title and Explanation Debit Credit

Dec 01 Supplies expenses $2,000

Cash $2,000

(To record Supplies inventory purchases)

Dec 02 Insurance Expenses $1,540

Cash $1,540

(To record prepaid insurance premiums)

Dec 15 Cash $13,000

Remodeling fees earned $13,000

(To record upfront remodeling fees)

Dec 28 Cash $3,700

Remodeling fees earned $3,700

(To record upfront remodeling fee)

Dec 31 Supplies $1,840

Supplies expenses $1,840

(To adjust supplies purchase asset to expense)

Dec 31 Prepaid Insurance $1,200

Insurance Expenses $1,200

($1,540 - $340)

(To adjust prepayment from asset to expense)

Dec 31 Remodeling fees earned $11,130

Unearned remodeling fees $11,130

($13,000 + $3,700 - $5,570)

(To adjust Unearned Remodeling Fees to

Remodeling Fees earned)