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Class Practice Qs 4 - Adjusting Entries

The adjusting entries for Mighty Fine Services Inc. at December 31, 2015 include: 1) Recording $200 of interest receivable and interest income for the notes receivable. 2) Recording $200 of insurance expense and reducing prepaid insurance for the portion used. 3) Recording $200 of supplies expense and reducing unused supplies for the portion used. 4) Recording $25 of interest expense and $25 of interest payable for loan interest. 5) Recording $7,500 of unearned subscription revenue and reducing subscription revenue for prepaid subscription.

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39 views

Class Practice Qs 4 - Adjusting Entries

The adjusting entries for Mighty Fine Services Inc. at December 31, 2015 include: 1) Recording $200 of interest receivable and interest income for the notes receivable. 2) Recording $200 of insurance expense and reducing prepaid insurance for the portion used. 3) Recording $200 of supplies expense and reducing unused supplies for the portion used. 4) Recording $25 of interest expense and $25 of interest payable for loan interest. 5) Recording $7,500 of unearned subscription revenue and reducing subscription revenue for prepaid subscription.

Uploaded by

Ahmed P. Fateh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question

The unadjusted trial balance of Mighty Fine Services Inc. includes the following account balances at
December 31, 2015, its fiscal year-end. No adjustments have been recorded. Assume all accounts have
normal debit or credit balances.

Car $15,000
Notes Receivable 10,000
Prepaid Rent -0-
Prepaid Insurance 600
Unused Supplies 500
Bank Loan 5,000
Subscription Revenue 9,000
Rent Expense 3,900
Truck Operation Expense 4,000

The following information applies to the fiscal year-end:

a. Notes receivable was issued on 1 November 2015. It is a 3-month, 12% interest bearing note.
b. The $600 prepaid insurance is for a one-year policy, effective September 1, 2015.
c. A physical count indicates that $300 of supplies is still on hand at December 31.
d. Interest on the bank loan is paid on the fifteenth day of each month; the unrecorded interest for
the last 15 days of December amounts to $25.
e. The Subscription Revenue account consists of one $9,000 cash receipt for a 6-month
subscription to the corporation’s Computer Trends report; the subscription period began
December 1, 2015.
f. Three days of salary amounting to $300 remain unpaid and unrecorded at December 31.
g. The rent expense account should reflect 12 months of rent. The monthly rent expense is $300.
h. A bill for December truck operation expense has not yet been received; an amount of $400 is
owed.
i. Subscription revenue of $500 has not been recorded.
j. Car has a useful life of 10 years.

Required: Prepare all necessary adjusting entries at December 31, 2015. Narratives are not needed.
Solution

a. Interest Receivable 200


Interest Income 200

b. Insurance expense 200


Prepaid Insurance 200

c. Supplies expense 200


Unused supplies 200

d. Interest expense 25
Interest Payable 25

e. Subscription Revenue 7500


Unearned Subscription Revenue 7500

f. Salaries expense 300


Salaries Payable 300

g. Prepaid rent 300


Rent expense 300

h. Truck Operation Expense 400


Truck Operation Expense Payable 400

i. A/c receivable 500


Subscription revenue 500

j. Depreciation exp 1500


Accumulated dep. - car 1500

Adjusted Trial Balance


Dr. ($) Cr. ($)
Car 15,000
Notes Receivable 10,000
Accounts receivable 500
Interest Receivable 200
Interest Income 200
Prepaid Rent 300
Insurance expense 200
Prepaid Insurance 400
Unused Supplies 300
Supplies Expense 200
Bank Loan 5,000
Interest Expense 25
Interest Payable 25
Subscription Revenue 2,000
Unearned Subscription Revenue 7,500
Rent Expense 3,600
Truck Operation Expense 4,400
Truck Operation Expense Payable 400
Salaries Expense 300
Salaries Payable 300
Depreciation exp 1500
Accumulated dep 1500

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