a. On December 1, 2015, Wolverine receives $2,100 cash from a company that is renting office space from Wolverine. The payment, representing rent for December and January, is credited to Unearned Revenue.
b. Wolverine purchases a one-year property insurance policy on July 1, 2015, for $10,920. The payment is debited to Prepaid Insurance for the entire amount.
c. Employee salaries of $1,100 for the month of December will be paid in early January 2016.
d. On November 1, 2015, the company borrows $5,500 from a bank. The loan requires principal and interest at 12% to be paid on October 30, 2016.
e. Office supplies at the beginning of 2015 total $810. On August 15, Wolverine purchases an additional $1,500 of office supplies, debiting the Supplies account. By the end of the year, $310 of office supplies remains.
Crimson Tide Music Academy offers lessons in playing a wide range of musical instruments. The unadjusted trial balance as of December 31, 2015, appears below. December 31 is the company's fiscal year-end.
Accounts Debits Credits
Cash $ 8,300
Accounts Receivable 7,500
Supplies 1,000
Prepaid Rent 4,800
Equipment 60,000
Accumulated Depreciation $ 8,000
Accounts Payable 5,700
Salaries Payable 0
Interest Payable 0
Utilities Payable 0
Notes Payable 10,000
Common Stock 25,000
Retained Earnings 9,000
Service Revenue 47,800
Salaries Expense 22,500
Interest Expense 0
Rent Expense 0
Supplies Expense 0
Utilities Expense 1,400
Depreciation Expense 0
Totals $ 105,500 $ 105,500
Information necessary to prepare the year-end adjusting entries appears below.
a. Depreciation of equipment for the year is $4,000.
b. Accrued salaries at year-end should be $1,100.
c. Crimson Tide borrows $10,000 on September 1, 2015. The principal is due to be repaid in four years. Interest is payable each August 31 at an annual rate of 9%.
d. Unused supplies at year-end total $500. Crimson Tide debits Supplies at the time supplies are purchased.
e. Crimson Tide opens a second studio by purchasing one year of rent in advance on April 1, 2015, for $4,800 ($400 per month) debiting Prepaid Rent.
f. Unpaid utilities for December total $300.
[The following information applies to the questions displayed below.]
The December 31, 2015, unadjusted trial balance for Demon Deacons Corporation is presented below.
Accounts Debit Credit
Cash $ 8,900
Accounts Receivable 13,900
Prepaid Rent 5,880
Supplies 2,900
Unearned Revenue $ 1,900
Common Stock 12,000
Retained Earnings 4,900
Service Revenue 42,280
Salaries Expense 29,500
$ 61,080 $ 61,080
At year-end, the following additional information is available:
a. The balance of Prepaid Rent, $5,880, represents payment on October 31, 2015, for rent from November 1, 2015, to April 30, 2016.
b. The balance of Unearned Revenue, $1,900, represents payment in advance from a customer. By the end of the year, $475 of the services have been provided.
c. An additional $500 in salaries is owed to employees at the end of the year but will not be paid until January 4, 2016.
d. The balance of Supplies, $2,900, represents the amount of office supplies on hand at the beginning of the year of $1,150 plus an additional $1,750 purchased throughout 2015. By the end of 2015, only $690 of supplies remains.