chapter03probsetc

# chapter03probsetc - PROBLEM SET C PROBLEM 3-1C Victors...

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PROBLEM SET C PROBLEM 3-1C 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 accounts. The following information concerns the adjusting entries to be recorded as of that date: a. The Office Supplies account started this year with a \$2,000 balance. During 2005, the company purchased supplies for \$8,400 which was added to the Office Supplies account. The inventory of supplies available at December 31, 2005 totaled \$3,600. b . An analysis of the company's Insurance policies provided these facts: Policy Date of Purchase Months of Coverage Cost A January 1, 2005 24 \$2,400 B April 1, 2005 36 \$1,800 C July1, 2005 12 \$2,700 c. The company has 20 employees, who earn a total of \$1,600 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. d . 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. e . 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. f. 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.

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Required 1. Use the information to prepare adjusting entries as of December 31, 2005. 2. Prepare journal entries to record the first subsequent cash transactions in 2006 for parts c and e. PROBLEM 3-2C Lunar Lander Systems, a tech center owned by R.U. Spacey, provides training to individuals who pay tuition directly to the school. The school also offers training to groups in off-site locations. The school’s unadjusted trial balance as of December 31, 2005, follows. Lunar Lander Systems initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2005, follow. Additional Items
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## This note was uploaded on 09/23/2010 for the course FIN 310 taught by Professor Smith during the Fall '10 term at Arizona Western College.

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chapter03probsetc - PROBLEM SET C PROBLEM 3-1C Victors...

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