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Explanation of Solution
Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and
Prepare journal entries to adjust Company CG’s accounts as of December 31.
Date | Accounts title and explanation | Debit ($) | Credit ($) |
December 31 | Supplies Expense | 435 | |
Office Supplies | 435 | ||
(To record the amount of supplies used during the period) | |||
December 31 | Prepaid Rent | 300 | |
Rent Expense | 300 | ||
(To record the amount of prepaid rent recognized) | |||
December 31 | Discount on Notes Payable | 200 | |
Interest Expense | 200 | ||
(To record the amount of prepaid interest recognized) | |||
December 31 | 11,800 | ||
4,600 | |||
Accumulated Depreciation-Store equipment (2) | 6,300 | ||
Accumulated Depreciation - Office equipment (3) | 900 | ||
(To record the amount of depreciation expense for the period) | |||
December 31 | Interest Expense (4) | 960 | |
Interest Payable | 960 | ||
(To record the accrued interest expense on notes payable) | |||
December 31 | Insurance Expense (5) | 140 | |
Prepaid Insurance | 140 | ||
(To record the insurance expense for the period) | |||
December 31 | Interest Receivable | 292 | |
Interest Revenue (6) | 292 | ||
(To record the interest earned but uncollectible) | |||
December 31 | Rent Revenue | 600 | |
Unearned Rent | 600 | ||
(To record the amount of revenue earned for the period | |||
December 31 | Travel Expenses | 787 | |
Prepaid Expenses | 787 | ||
(To record the amount of prepaid expense for the person airfare the period) | |||
December 31 | Property Tax Expense | 2,300 | |
Property Tax Payable | 2,300 | ||
(To record the property tax expense for the year) | |||
December 31 | Utilities expense | 302 | |
Utilities payable | 302 | ||
(To record the unpaid utility bill) | |||
December 31 | Salaries expense | 927 | |
Salaries payable | 927 | ||
(To record the accrued salaries at the end of the accounting period) | |||
December 31 | Income tax expense (7) | 3,087 | |
Income tax payable | 3,087 | ||
(To record the income tax expense) |
Table (1)
Working note (1):
Calculate the amount of accumulated depreciation for building:
Working note (2):
Calculate the amount of accumulated depreciation for store equipment:
Working note (3):
Calculate the amount of accumulated depreciation for office equipment:
Working note (4):
Calculate the amount of interest expense:
Working note (5):
Calculate the amount of insurance expense:
Working note (6):
Calculate the amount of interest revenue:
Working note (7):
Calculate the amount of income tax:
1. To record the supplies expense:
- Supplies expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit supplies expenses with $435.
- Office supplies are an asset account and it is decreased. Thus, credit office supplies with $435.
2. To record the rent expense:
- Rent expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit rent expenses with $300.
- Prepaid rent is an asset account and it is decreased. Thus, credit prepaid rent with $30.
3. To record the discount on note payable:
- Discount on notes payable is a contra-liability and it decreases the value of the liability. Thus, debit discount on notes payable with $200.
- Ø
- Interest expense is an expense account and it is decreased. Thus, credit interest expense with $200.
4. To record the depreciation expense:
- Depreciation expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit depreciation expenses with $11,800.
- Accumulated depreciation-Building is a contra-asset and it decreases the value of the asset. Thus, credit accumulated depreciation-Building with $4,600.
- Accumulated depreciation- Store equipment is a contra-asset and it decreases the value of the asset. Thus, credit accumulated depreciation-Store equipment with $6,300.
- Accumulated depreciation-Office equipment is a contra-asset and it decreases the value of the asset. Thus, credit accumulated depreciation-Office equipment with $900.
5. To record interest expense:
- Interest expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit interest expense with $960.
- Interest payable is a liability and it is increased. Thus, credit interest payable with $960.
6. To record the insurance expense:
- Insurance expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit insurance expenses with $140.
- Prepaid insurance is an asset account and it is decreased. Thus, credit prepaid insurance with $140.
7. To record the interest receivable:
- Interest receivable is an asset account and it is increased. Thus, debit interest receivable with $292.
- Interest revenue is a revenue account and it increases the value of the stockholders’ equity. Therefore, credit interest revenue with $292.
8. To record the rent revenue:
- Rent revenue is a revenue account and it is decreased. Thus, debit rent revenue with $600.
- Unearned rent is a liability account and it is increased. Therefore, credit unearned rent with $600.
9. To record the travel expense:
- Travel expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit travel expenses with $787.
- Prepaid expense is an asset account and it is decreased. Thus, credit prepaid expense with $787.
10. To record the property tax expense:
- Property tax expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit property tax expense with $2,300.
- Property tax payable is a liability account and it is increased. Therefore, credit property tax payable with $2,300.
11. To record the utilities expense:
- Utilities expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit utilities expense with $302.
- Utilities payable is a liability account and it is increased. Therefore, credit utilities payable with $2,300.
12. To record the salaries expense:
- Salaries expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit salaries expense with $927.
- Salaries payable is a liability account and it is increased. Therefore, credit salaries with $2,300.
13. To record the income tax expense:
- Income tax expense is an expense account and it decreases the value of shareholders’ equity. Thus, debit income tax expense with $3,087.
- Income tax payable is a liability account and it is increased. Therefore, credit income tax payable with $2,300.
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