Adjusting Entries Sarah Company’s trial balance on December 31 (the end of its annual accounting period), included the following account balances before adjustments:   DEBIT  CREDIT  Notes Receivable  $10,000  - Insurance Expense  3,000  - Delivery Equipment  14,000 - Building  60,000 -  Unearned Rent  - $ 4,320  Notes Payable  - 7200 Office Supplies Expenses  1,000 -  Reviewing the company’s recorded transactions and accounting records, you find the following data pertaining to the December 31 adjustments:1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid $3,000 for a 2-year insurance policy.3. The building was acquired 10 years ago and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of of $8,000. 4. The delivery equipment was purchased on April 2. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000. 5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company.6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid.7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required:Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31. Each journal entry explanation should summarize your calculations.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Adjusting Entries Sarah Company’s trial balance on December 31 (the end of its annual accounting period), included the following account balances before adjustments:

  DEBIT  CREDIT 
Notes Receivable  $10,000  -
Insurance Expense  3,000  -
Delivery Equipment  14,000 -
Building  60,000
Unearned Rent  - $ 4,320 
Notes Payable  - 7200
Office Supplies Expenses  1,000

Reviewing the company’s recorded transactions and accounting records, you find the following data pertaining to the December 31 adjustments:

1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 

2. On August 2, the company had paid $3,000 for a 2-year insurance policy.
3. The building was acquired 10 years ago and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of of $8,000.
 
4. The delivery equipment was purchased on April 2. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000.
 
5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company.

6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid.

7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year.

Required:
Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31. Each journal entry explanation should summarize your calculations.

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