Adjusting Entries Sarah Company's trial balance on December 31, 2013 (the end of its annual accounting period), included the following account balances before adjustments:
- Debit Credit
- Delivery Equipment 14,000
- Building 60,000
- Unearned Rent $4,320
- Notes Payable 7,200
Reviewing the company's recorded transactions and accounting records for 2013, you find the following data pertaining to the December 31, 2013 adjustments:
Required:
Prepare the adjusting entries that are necessary to bring Sarah's accounts up to date on December 31, 2013. Each journal entry explanation should summarize your calculations. No calculations = no points for me.
1. On July 2, 2013, the company had accepted a $10,000, 9-month, 10 note receivable from a customer. The interest is to be collected when the note is collected
2. On August 2, 2013, the company had paid $3,000 for a 2-year insurance policy.
3. The building was acquired in 1998 and is being depreciated using the straight-line method over a 25-year lief. It has an estimated residual value of $8,000.
4. The delivery equipment was purchased on April 2, 2013. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000.
5. On September 1, 2013, the company had received 2 years' rent in advance for a portion of a building it is renting to Victoria Company.
6. On December 1, 2013, the company had issued a $7,200, 30month, 12% note payable to a supplier. The interest is to be paid when the note is paid.
7. On January 2, 2013, the company purchased $1,000 of office supplies. A physical count on December 31, 2013, revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year.