ch4 hw answers (part 2) - CHAPTER 4 HOMEWORK(PART2 P4-5A a...

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CHAPTER 4 HOMEWORK (PART2): P4-5A a. Prepare the adjusting entries that must be made prior to the preparation of the financial statements for the year ended December 31, 2007. Date Transactions Debit Credit 1. 12/31/07 Insurance Expense 2,400 Prepaid Insurance 2,400 To record insurance used during 2007. 2. 12/31/07 Interest Expense 22,000 Interest Payable 22,000 To record interest incurred in 2007 on N/P. 3. 12/31/07 Unearned Subs. Fees 60,000 Subscription Fees 60,000 To record revenue earned during 2007. 4. 12/31/07 Rent Expense 2,000 Prepaid Rent 2,000 To record rent expense for Nov-Dec. 5. 12/31/07 Wages Expense 2,000 Wages Payable 2,000 To record wages expense for last day of December 2007.
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P4-5A (continued) b. Open T-accounts for the relevant accounts and post the journal entries to each account. BB 6,000 (1) 2,400 BB 10,000 (4) 2,000 3,600 8,000 BB 38,000 (5) 2,000 (2) 22,000 60,000 2,000 (3) 60,000 BB 70,000 (2) 22,000 10,000 22,000 (3) 60,000 (4) 2,000 60,000 2,000 BB 25,000 (1) 2,400 (5) 2,000 2,400 27,000 Interest Expense Unearned Subscription Fees Rent Expense Wages Expense Wages Payable Interest Payable Prepaid Rent Insurance Expense Subscription Fees Prepaid Insurance
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P4-5A (continued) c. Calculate the account balances that would appear on the financial statements. Prepaid Insurance $3,600 Prepaid Rent 8,000 Wages Payable 2,000 Interest Payable 22,000 Wages Expense 27,000 Subscription Fees 60,000 Unearned Subscription Fees 10,000 Interest Expense 60,000 Rent Expense 2,000 Insurance Expense 2,400 Calculations 1. Insurance Expense ($7,200 x 12/36) = $2,400 expense (Income Statement) Prepaid Insurance ($6,000 - $2,400) = $3,600 remaining balance (Balance Sheet) 2. Interest Exp.
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