Ac c rued interes t on the loan at dec ember 31

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Unformatted text preview: c iation of the firm's offic e building is bas ed on an es timated life of 25 y ears . The building was purc has ed in 2007 for $330,000. 3. Ac c rued, but unbilled, rev enue during Dec ember amounts to $64,000. 4. On Marc h 1, the firm paid $1,800 to renew a 12­month ins uranc e polic y . The entire amount was rec orded as Prepaid Ins uranc e. 5. The firm rec eiv ed $14,000 from the King Bis c uit Company in adv anc e of dev eloping a s ix ­month mark eting c ampaign. The entire amount was initially rec orded as Unearned Rev enue. At Dec ember 31, $3,500 had ac tually been earned by the firm. 6. The c ompany 's polic y is to pay its employ ees ev ery Friday . Sinc e Dec ember 31 fell on a Wednes day , there was an ac c rued liability for s alaries amounting to $2,400. a. Rec ord the nec es s ary adjus ting journal entries on Dec ember 31, 2011. (Do not round your interm ediate calculations. Round your answers to the nearest whole dollar. Om it the "$" sign in your response.) General J ournal 1. Interes t ex pens e Interes t pay able 2. Deprec iation ex pens e: Offic e building Ac c umulated deprec iation: Offic e building 3. Ac c ounts rec eiv able Mark eting rev enue earned 4. Ins uranc e ex pens e Prepaid ins uranc e 5. Unearned rev enue Mark eting rev enue earned 6. Salaries ex pens e Salaries pay able e z to.mhe c loud.mc gr a w- hill.c om/hm_a c c ounting.tpx? todo= pr intvie w Debit 1,200 1,100 Credit 1,200 1,100 64,000 150 3,500 2,400 64,000 150 3,500 2,400 6/7 11/18/13 Assignme nt Pr int Vie w b. By how muc h did Sweeney & As s oc iates ' net inc ome inc reas e or dec reas e as a res ult of the adjus ting entries performed in part a? (Ignore inc ome tax es .) (Om it the "$" sign in your response.) Net inc ome inc reas e $ 62,650 rev: 10_04_2011 Explanation: a. 2. To rec ord deprec iation on offic e building ($330,000 / 25 y ears ) × 1 / 12 = $1,100). 4. To rec ord ins uranc e ex pens e ($1,800 / 12 months = $150). b. Net inc ome $62,650 Inc reas e ($64,000 + $3,500 – $1,200 – $1,100 – $150 – $2,400). e z to.mhe c loud.mc gr a w- hill.c om/hm_a c c ounting.tpx? todo= pr intvie w 7/7...
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