PROBLEM SET C
Victor’s Company’s annual accounting period ends on December 31, 2005. The company
follows the practice of recording prepaid expenses and unearned revenues in balance sheet
The following information concerns the adjusting entries to be recorded as of that
The Office Supplies account started this year with a $2,000 balance. During 2005, the
supplies for $8,400 which was added to the Office Supplies account. The
inventory of supplies available at December 31, 2005 totaled $3,600.
. An analysis of the company's Insurance policies provided these facts:
Date of Purchase
Months of Coverage
January 1, 2005
April 1, 2005
The company has 20 employees, who earn a total of
in salaries each working day.
They are paid each Monday for their work in the five-day work week ending on the previous
Friday. Assume that December 31, 2005 is a Tuesday, and all 20 employees worked the first two
days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five
full days on Monday, January 6, 2006.
. The company purchased a building on January 1, 2005. It cost $785,000 and is expected to
have $35,000 salvage value at the end of its predicted 25-year life.
. Since the company is not large enough to occupy the entire building it owns, it rented space to
a tenant at $1,200 per month, starting on October 1, 2005. The rent was paid on time on October
1, and November 1, and the amount received was credited to the Rent Earned account. However,
the tenant has not paid the December rent. The company has worked out an agreement with the
tenant who has promised to pay both the December and January rent in full on January 15. The
tenant has agreed to not fall behind again.
On December 1, the company rented space to another tenant for $1,600 per month. The tenant
paid six months' rent in advance on that date. The payment was recorded with a credit to the
Unearned Rent account.