USA: +1 725-224-8795 
Sign in
A review of the ledger of Blossom Company at December 31, 2017, produces these data pertaining to the preparation of annual adjusting entries.
| 1. | Prepaid Insurance $15,243. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2016, for $9,630. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2017, for $7,218. This policy has a term of 18 months. | |
| 2. | Unearned Rent Revenue $304,000. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. |
| Term | Number of | |||||||||
| Date | (in months) | Monthly Rent | Leases | |||||||
| Nov. 1 | 8 | $4,500 | 4 | |||||||
| Dec. 1 | 5 | $8,000 | 4 | |||||||
| 3. | Notes Payable $40,400. This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1. | |
| 4. | Salaries and Wages Payable $0. There are 8 salaried employees. Salaries are paid every Friday for the current week. 5 employees receive a salary of $610 each per week, and 3 employees earn $710 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December. |
Prepare the adjusting entries at December 31, 2017. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Don't use plagiarized sources. Get Your Custom Essay on
Question & Answer: A review of the ledger of Blossom Company at December 31, 2017, produces these data pertaining to the preparation of annual adjusting entries……
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS $13/PAGE
| No. | Account Titles and Explanation | Debit | Credit |
| 1. |  |
|
|
|
|
|
|
| 2. | |
|
|
|
|
|
|
| 3. | |
|
|
|
|
|
|
| 4. | |
|
|
|
|
|
Expert Answer
| No. | Account titles and explanations | Debit | Credit | |||||||
| 1) | Insurance expenses | $ 8,022 | ||||||||
| Prepaid Insurance | $ 8,022 | |||||||||
| (To record insurance expired during the year) | ||||||||||
| 2) | Unearned Rent Revenue | $ 68,000 | ||||||||
| Rent Revenues | $ 68,000 | |||||||||
| (To record rent revenues) | ||||||||||
| 3) | Interest expenses | $ 707 | ||||||||
| Accrued Interest Payable | $ 707 | |||||||||
| (To record interest expenses accrued) | ||||||||||
| 4) | Salaries and wages expenses | $ 3,108 | ||||||||
| Salaries and wages Payable | $ 3,108 | |||||||||
| (To record salaries expenses for the year accrued) | ||||||||||
| Workings: | ||||||||||
| 1) | Insurance cost of B4564 | = | $ 9,630 | |||||||
| Period | = | 3 Years | ||||||||
| Yearly insurance expired | = | $ 9,630 | / | 3 | = | $ 3,210 | ||||
| Insurance cost of A2958 | = | $ 7,218 | ||||||||
| Period | = | 18 months | ||||||||
| Yearly insurance expired | = | $ 7,218 | x | (12/18) | = | $ 4,812 | ||||
| Total insurance expired during year | $ 8,022 | |||||||||
| 2) | ||||||||||
| Date | Term (in Months) | Monthly Rent | Number of leases | Term in this year | Revenue earned | |||||
| a | b | c | a*b*c | |||||||
| Nov 1 | 8 | $ 4,500 | 4 | 2 | $ 36,000 | |||||
| Dec 1 | 5 | $ 8,000 | 4 | 1 | $ 32,000 | |||||
| Insurance expired during this year | $ 68,000 | |||||||||
| 3) | ||||||||||
| Interest during 3 months | = | $ 40,400 | x | 7% | x | 3/12 | ||||
| = | $ 707 | |||||||||
| 4) | Salaries of 5 employees for 3 days | = | 5*610*3/5 | = | $ 1,830 | |||||
| Salaries of 3 employees for 3 days | = | 3*710*3/5 | = | $ 1,278 | ||||||
| Total salary expenses | $ 3,108 | |||||||||
