[kizzyb]

Directions: Record the necessary adjusting and reversing entries from the data presented.
Eastman company present the following data at the end of its fiscal year on December 31,20xx.

(a) The company holds a 60-day note dated dececember 21,20xx. The note has a face value of 15,000 and carries interest at 9%.
Interest expense 22.50 15,000/10=1500x0.09%/360=22.50
interest payable 22.50

(b) The subscriptions income account shows a credit balance of 112,000, representing subscriptions to eight issues of a company publication. Five issues have been delivered in 20xx.
Subscriptions expense 22,400
Supscriptions income 22,400 112,000/5

(c) The unearned rent income shows a credit for 30,000, representing six months' rent recevied on December 1, 20xx.

unearned reveue 180,000
revenue 180,000

(d) the store supplies account shows a balance od 4,967 prior to adjustment. The inventory of store supplies shows 568 on hand.

Suppies 5,535
Store supplies expense 5,535

(e) THe insurance expense account shows a debit for 3720, representing a three-year premium paid on February 1, 20xx.

Insurance expense 3720
prepaid insurance 3720

(f) Salaries are paid on Thursday for the preceding week. Weekly salaries amount to 58,000. This year ended on a Thursday.

Salaries Expense 58,000
Salearies payable 58,000

[CaptainForest]

Do my explanations make sense to you?

Directions: Record the necessary adjusting and reversing entries from the data presented.
Eastman company present the following data at the end of its fiscal year on December 31,20xx.

(a) The company holds a 60-day note dated dececember 21,20xx. the note has a face value of 15,000 and carries interest at 9%.
Interest expense 22.50 15,000/10=1500x0.09%/360=22.50
interest payable 22.50

Dr. Interest Expense 36.99
Cr. Interest Payable 36.99

15,000 x .09 = 1,350 total interest in 1 year. However, only must account for 10 days.
So, 1,350 x 10 / 365 = 36.99

(b) The subscriptions income account shows a credit balance of 112,000, representing subscriptions to eight issues of a company publication. Five issues have been delivered in 20xx.
Subscriptions expense 22,400
Supscriptions income 22,400 112,000/5

Dr. Unearned Revenue 70,000
Cr. Revenue 70,000

When you collect money in advance, that is a liability, called unearned revenue.

In this case, you have collected $112,000 for 8 issues. So each issue, you would recognize 112,000/8 or 14,000.

You have made 5 issues, so you must recognize 5 of the 8 issues.

Calculation: 112,000 x 5 / 8 = 70,000

(c) The unearned rent income shows a credit for 30,000, representing six months' rent recevied on december 1, 20xx.

unearned reveue 180,000
revenue 180,000

Dr. Unearned Revenue 5,000
Cr. Revenue 5,000

You have collected 30,000 of rent on Dec 1. This is to be used over 6 months. So each month, you recognize 30,000/6 = 5,000

Only 1 month is used up at Dec 31

So the calculation is 30,000 x 1 / 6 = 5,000

(d) the store supplies account shows a balance od 4,967 prior to adjustment. The inventory of store supplies shows 568 on hand.

Suppies 5,535
Store supplies expense 5,535

Dr. Supplies Expense 4,129
Cr. Supplies 4,129

You only write down your Supplies once a year, at the end of the year.

At the beginning of the year AND all the purchases made throught the year, the value is 4,697.

At the end, you only have 568 left. That means you used up (4697-568) or 4,129 of supplies.

Therefore, you must lower your supplies account by 4,129

This way, Supplies old said 4,967. Take off the 4,129 and you are left with 568 of supplies…which is what you are suppose to have!

(e) THe insurance expense account shows a debit for 3720, representing a three-year premium paid on February 1, 20xx.

Insurance expense 3720
prepaid insurance 3720

Dr. Insurance Expense 1,136.67
Cr. Prepaid Insurance 1,136.67

Prepaid Insurance is an asset. And you must spread it across the entire life of it. In this case, it must be spread across 3 years from when you bought it Feb 1.

So each month, you must expense 3,720/36 or 103.33 (there are 36 months in 3 years).

However, normally you don't expense it each month, but rather just once, at the end of the year.

So, you must account for 11 months (Feb 1 – Dec.31)

Calculation: 3,720 x 11 / 36 = 1,136.67

(f) Salaries are paid on Thursday for the preceding week. Weekly salaries amount to 58,000. This year ended on a Thursday.

Salaries Expense 58,000
Salearies payable 58,000

Dr. Salaries Expense 46,400
Cr. Salaries Payable 46,400

So you work for 1 week and then get paid on the following week (Thursday).

Year end is on a Thursday. You need to record that weeks salary which wont be paid until NEXT Thursday.

That is, you have to account for 4 of the 5 days of the week (Mon-Thurs).

Calculation 58,000 x 4 / 5 = 46,400