PART I—COMPREHENSIVE JOURNAL ENTRY QUESTION (38 POINTS)
Trek, Inc. had the following accounts, all with normal balances at December 1, 2006.
Trek prepares adjusting
entries once per year at December 31 (the company’s year end).
The balance in Advertising Payable represents an
amount due to Sulu Advertising for a bill received in November. The building was bought on July 1, 2004, has a
$40,000 residual value, and is expected to last 30 years.
The Note Receivable was received from a customer on
August 1, 2006, carries a 6% annual interest rate and will be collected on May 1, 2006.
Trek had the following transactions in December:
Issued 2,000 shares of $20 par value common stock in exchange for equipment valued at $40,000.
equipment is expected to have a 5-year life and a $2,000 salvage value at the end of its life.