E4-6 Recording Seven Typical Adjusting Entries
SportLand is completing the accounting process for the year just ended, December 31,
2007. The transactions during 2007 have been journalized and posted. The following
data with respect to adjusting entries are available in requirement 1:
1. Identify each of these transactions as a deferred revenue, deferred expense,
accrued revenue, or accrued expense.
2. Using the process illustrated in the chapter, for each situation record the
adjusting entry that should be recorded for Heald’s at December 31, 2007.
. a. Office supplies on hand at January 1, 2007, was $300. Office supplies
purchased and debited to Office Supplies during the year amounted to
$750. The year-end count showed $175 of supplies on hand.
b. Wages earned by employees during December 2007, unpaid and
unrecorded at December 31, 2007, amounted to $2,400. The last payroll
was December 28; the next payroll will be January 6, 2004.
c. Three-fourths of the basement of the store is rented for $900 per month
to another merchant, Sterling Dry Goods. Sterling Dry Goods sells
compatible, but not competitive, merchandise. On November 1, 2007,
the store collected six months' rent in the amount of $5,400 in advance
from Sterling Dry Goods; it was credited in full to Unearned Rent
Revenue when collected.
d. The remaining basement space is rented to Frothing & Sandalwood for
$270 per month, payable monthly. On December 31, 2007, the rent for
November and December 2007 had not been collected or recorded.
Collection is expected January 10, 2004.
e. The store used delivery equipment that cost $26,000 and $5,200 was the
estimated depreciation for 2007.
f. On July 1, 2007, a two-year insurance premium amounting to $2,700
was paid in cash and debited in full to Prepaid Insurance. Coverage
began on July 1, 2007.
g. SportLand operates a repair shop to meet its own needs. The shop also
does repairs for Sterling Dry Goods. At the end of December 31, 2007,
Sterling Dry Goods had not paid for $500 in completed alterations. This
amount has not yet been recorded as Repair Shop Revenue. Collection is
expected during January 2004.