Question

Whispering Winds Company has the following balances in selected accounts on December 31, 2022. Accounts Receivable $ 0 Accumulated DepreciationâEquipment 0 Equipment 8,120 Interest Payable 0 Notes Payable 11,600 Prepaid Insurance 2,436 Salaries and Wages Payable 0 Supplies 2,842 Unearned Service Revenue 34,800 All the accounts have normal balances. The following information has been gathered at December 31, 2022. 1. Whispering Winds Company borrowed $11,600 by signing a 12%, one-year note on September 1, 2022. Interest will be paid when the note is repaid. 2. A count of supplies on December 31, 2022, indicates that supplies of $1,044 are on hand. 3. Depreciation on the equipment for 2022 is $1,160. 4. Whispering Winds paid $2,436 for 12 months of insurance coverage on June 1, 2022. 5. On December 1, 2022, Whispering Winds collected $34,800 for consulting services to be performed evenly from December 1, 2022, through March 31, 2023. 6. Whispering Winds performed consulting services for a client in December 2022. The client will be billed $4,872. 7. Whispering Winds pays its employees total salaries of $10,440 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2022."

Answer 1

Question Completion:

Record the adjustments.

Answer:

Whispering Winds Company

1. Debit Interest Expense $464

Credit Interest Payable $464

To record the interest expense for 4 months.

2. Debit Supplies Expense $1,798

Credit Supplies $1,798

To record supplies expense for the year.

3. Debit Depreciation Expense - Equipment $1,160

Credit Accumulated Depreciation - Equipment $1,160

To record the depreciation expense for the year.

4. Debit Insurance Expense $1,421

Credit Prepaid Insurance $1,421

To record insurance expense for 7 months.

5. Debit Unearned Revenue $8,700

Credit Service Revenue $8,700

To record service revenue earned for December.

6. Debit Accounts Receivable $4,872

Credit Service Revenue $4,872

To record service revenue earned for December.

7. Debit Salaries Expense $6,264

Credit Salaries Payable $6,264

To accrue unpaid salaries for 3 days.

Step-by-step explanation:

a) Data and Calculations:

Account balances on December 31, 2022:

Accounts Receivable $ 0

Accumulated Depreciation-Equipment 0

Equipment 8,120

Interest Payable 0

Notes Payable 11,600

Prepaid Insurance 2,436

Salaries and Wages Payable 0

Supplies 2,842

Unearned Service Revenue 34,800

b) Interest expense = $11,600 * 12% * 4/12

c) Supplies expense = $2,842 - 1,044 = $1,798

d) Insurance expense = $2,436 * 7/12 = $1,421

e) Service Revenue = $34,800 * 1/4 = $8,700 with the balance as Deferred Revenue.

f) Salaries expense for 3 days = $10,440 * 3/5 = $6,264