Question

Below are transactions for a company during Year 1. On December 1, Year 1, the company receives $3,400 cash from the company that is renting office space from the company. The payment, representing rent for December and January, is credited to Deferred Revenue. The company purchases a one-year property insurance policy on July 1, Year 1, for $12,480. The payment is debited to Prepaid Insurance for the entire amount. Employee salaries of $2,400 for the month of December will be paid in early January Year 2. On November 1, Year 1, the company borrows $12,000 from a bank. The loan requires principal and interest at 10% to be paid on October 30, Year 2. Office supplies at the beginning of Year 1 total $940. On August 15, the company purchases an additional $2,800 of office supplies, debiting the Supplies account. By the end of the year, $440 of office supplies remains. Record the necessary adjusting entries at December 31, 2018, for Wolverine Company. You do not need to record transactions made during the year. Assume that no financial statements were prepared during the year and no adjusting entries were recorded.

Answer 1

December 31

Dr Deferred revenue 1,700

Cr Rent revenue 1,700

December 31

Dr Insurance Expense 6,240

Cr Prepaid insurance 6,240

December 31

Dr Salaries Expense 2,400

Cr Salaries payable 2,400

December 31

Dr Interest Expense 200

Cr Interest payable 200

December 31

Dr Salaries Expense 3,300

Cr Supplies 3,300

Step-by-step explanation:

Preparation of Journal entries

December 31

Dr Deferred revenue 1,700

(3,400/2)

Cr Rent revenue 1,700

(To record rent revenue)

December 31

Dr Insurance Expense 6,240

($12,480*6/12)

Cr Prepaid insurance 6,240

(To Record insurance expense)

December 31

Dr Salaries Expense 2,400

Cr Salaries payable 2,400

(To record Salaries Expense)

December 31

Dr Interest Expense 200

(12,000*10%*2/12)

Cr Interest payable 200

(To record interest Expense)

December 31

Dr Salaries Expense 3,300

($940+$2,800-$440)

Cr Supplies 3,300

(To record supplies Expense)