Chapter 3, Problem 7E

Exercise 3-7 Preparing adjusting entries P1 P3 P4

For each of the following separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31. Entries can draw from the following partial chart of accounts: Cash: Interest Receivable; Supplies; Prepaid Insurance; Equipment; Accumulated Depreciation— Equipment: Wages Payable: Interest Payable: Unearned Revenue: Interest Revenue: Wages Expense: Supplies Expense: Insurance Expense: Interest Expense; and Depreciation Expense—Equipment.
a. Wages of $8,000 are earned by workers but not paid as of December 31.
b. Depreciation on the company's equipment for the year is $18,000.
C. The Supplies account had a $240 debit balance at the beginning of the year. During the year. $5.200 of supplies are purchased. A physical count of supplies at December 31 shows $440 of supplies available. Check (of) Dr. Insurance Expense. $2,8CD
d. The Prepaid Insurance account had a $4,000 balance at the beginning of the year. An analysis of insurance policies shows that $1 ,200 of unexpired insurance benefits remain at December 31.
e. The company has earned (but not recorded) $1,050 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10.
(e) Cr. Interest Revenue, $1,050
f. The company has a bank loan and has incurred (but not recorded) interest expense of $ 2,500 for the year ended December 31. The company will pay the interest five days after the year-end on January 5.