P3-6A Prepare adjusting entries.


A review of the ledger of Greenberg Company at December 31, 2010, produces the following important data for the preparation of annual adjusting entries:

Prepaid Advertising, December 31 unadjusted balance, $14,160: This balance consists of payments on two advertising contracts for monthly advertising in two trade magazines. The first advertisement runs in the month in which the contract is signed. The terms of the contracts are as follows:

Contract Signing Date Amount Number of Magazine Issues
A650 March 1 $ 6,240 12
B974 July 1 7,920 24
$14,160


2)Delivery trucks, December 31 unadjusted balance, $72,000: The company owns two delivery trucks. The first (truck 1), purchased for $32,000 on January 2, 2007, has an estimated six-year useful life. The second (truck 2), purchased for $40,000 on June 1, 2009, has an estimated five-year useful life.
3)

Notes Payable, December 31 unadjusted balance, $85,000: This consists of a 10-month, 7% note, dated June 1. Interest is payable at maturity.
Salaries Payable, December 31 unadjusted balance, $0: There are nine salaried employees. 4)

Salaries are paid every Saturday for a six-day workweek (Monday–Saturday). Six employees receive a salary of $750 per week, and three employees earn $600 per week. December 31 is a Friday.
5)


Unearned Rent Revenue, December 31 unadjusted balance, $288,000: Greenberg began subleasing office space to tenants in its new building on November 1. At December 31, Greenberg had the following rental contracts that were paid in full for the entire term of the lease:

Date Term (in months) Monthly Rent Number of Leases Total Rent Paid
Nov. 1 6 $4,000 5 $120,000
Dec. 1 6 7,000 4 168,000

$288,000

You first need to figure out what your adjusting entries will be in your probblem, then you need to figure out what the amount will be.

For example in number one your adjusting entry will be for advertising expense. Now you have to figure out how much of the two advertising contracts have been used so that you can calculate the amount used during the acocunting period . Now you can journalize the adjusting entry.

Remember that an adjusting entry affects one balance sheet account and one income statement account. For number one the balance sheet account is Prepaid Advertising and the income statement account is advertising expense.