Problem 3-1a
a.) The Office Supplies account started the year with a $3,000 balance. During 2011, the company purchased supplies for $12,400, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2011, totaled $2,640.
3,000 + 12,400 - 2,640 = 12,760 adjustment
Dr Office Supplies Expense 12,760
Cr Office Supplies 12,760
b.) An analysis of the company's insurance policies provided the following facts:
Policy A was purchased on April 1, 2010 for 24 months at the amount of $15,840.
15,840 / 24 = 660 per month
660 x 12 months = 7,920
Policy B was purchased on April 1, 2011 for 36 months at the amount of $13,068.
13,068 / 36 = 1,005.23 per month
1,005.23 x 9 months = 9,047
Policy C was purchased on August 1, 2011 for 12 months at the amount of $2,700.
2,700 / 12 = 225 per month
225 x 5 months = 1,125
The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.)
7,920 + 9,047 + 1,125 = 18,092 adjustment
Dr Insurance Expense 18,092
Cr Prepaid Insurance 18,092 c.) The company has 15 employees, who earn a total of $2,100 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2011, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year’s Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2012.
2,100 x 2 = 4,200 adjustment
Dr Salaries Expense 4,200
Cr Salaries Payable 4,200
*Note: The pay for New Year's Day is irrelevant, since it falls in the next year.
d.) The company purchased a building on January 1, 2011. It cost $855,000 and is expected to have a $45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $27,000.
Dr
3,000 + 12,400 - 2,640 = 12,760 adjustment
Dr Office Supplies Expense 12,760
Cr Office Supplies 12,760
b.) An analysis of the company's insurance policies provided the following facts:
Policy A was purchased on April 1, 2010 for 24 months at the amount of $15,840.
15,840 / 24 = 660 per month
660 x 12 months = 7,920
Policy B was purchased on April 1, 2011 for 36 months at the amount of $13,068.
13,068 / 36 = 1,005.23 per month
1,005.23 x 9 months = 9,047
Policy C was purchased on August 1, 2011 for 12 months at the amount of $2,700.
2,700 / 12 = 225 per month
225 x 5 months = 1,125
The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.)
7,920 + 9,047 + 1,125 = 18,092 adjustment
Dr Insurance Expense 18,092
Cr Prepaid Insurance 18,092 c.) The company has 15 employees, who earn a total of $2,100 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2011, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year’s Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2012.
2,100 x 2 = 4,200 adjustment
Dr Salaries Expense 4,200
Cr Salaries Payable 4,200
*Note: The pay for New Year's Day is irrelevant, since it falls in the next year.
d.) The company purchased a building on January 1, 2011. It cost $855,000 and is expected to have a $45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $27,000.
Dr