Problem 1: Adjusting the Books Using Adjusting Entries
Huntington Company's annual accounting year ends on December 31. It is December 31, 2011, and all of the 2011 entries except the following adjusting entries have been made:
1. On September 1, 2011, Huntington collected six months of rent worth $9,000 on storage space. At that date, Zimmerman debited Cash and credited Unearned rent Revenue for $9,000.
2. On October 1, 2011, the company borrowed $30,000 from a local bank and signed a 12 percent note for that amount. The principal and interest are payable on the maturity date, September 30, 2012.
3. Depreciation of $5,000 must be recognized on a service truck purchased on July 1, 2011, at a cost of $30,000.
4. Cash of $4,800 was collected on November 1, 2011, for services to be rendered evenly over the next year beginning on November 1. Unearned Service Revenue was credited when the cash was received.
5. On November 1, 2011, Huntington paid a one-year premium for fire insurance of a total of $12,000 for one year of coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.
6. The company earned service revenue of $6,000 on a special job that was completed December 24, 2011. Collection will be made during January 2012. No entry has been recorded.
7. At December 31, 2011, wages earned by employees totaled $17,500. The employees will be paid on the next payroll date, January 15, 2012.
8. On December 31, 2011, the company estimated it owed $16,000 for 2011 property taxes on land. The tax will be paid when the bill is received in January 2012.
Using the information above, prepare the adjusting entry required for each transaction at December 31, 2011.
Problem 2: Analyzing the Effects of Adjusting Entries on the Accounting Model
Refer to Problem 1. Using + for increase, - for decrease, and NE for no effect, indicate in a table the effect of each adjusting entry in Problem 1 (a through h) and the amount of the effect. Reminder: Assets = Liabilities + Stockholders' Equity; Revenues - Expenses = Net Income; and Net Income accounts are closed to Retained Earnings, a part of Shareholders' Equity.
Attachment:- assessment_3_problem_1.xls
Attachment:- assessment_3_problem_2.xls