ACT3391HomeworkFall2009Solution3

ACT3391HomeworkFall2009Solution3 - HOMEWORK - Fall 2009...

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HOMEWORK - Fall 2009 – Solutions 3. (0.5 point each) Prepare the Adjusting Journal Entries (AJEs) that should be made on December 31, 2008, the end of the accounting year, for each of the following independent situations. If no AJE is required, indicate “none.” Assume the firm only makes AJEs at the end of the accounting year. a. On March 1, 2008, the firm collected $120,000 of rent for 12 months in advance. The journal entry to record the receipt included a credit to a revenue account. Ten months earned and two months unearned. Original Entry: Cash $120,000 AJE: Revenue $20,000 Revenue $120,000 Unearned $20,000 b. On February 28, 2008, the company borrowed $2,000,000 for one year at 6% simple interest. Interest and principle are due on March 1, 2009. Ten months of interest owed; $2,000,000 x 6% x 10/12 = $100,000 Original Entry: Cash $2,000,000 AJE: Interest expense $100,000 Notes payable $2,000,000 Interest payable $100,000 c. On September 1, 2008, the company invested in a four-year, 8%, $12,000,000 bond. Interest will be received
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