Page 144 - Accounting Principles (A Business Perspective)

3. Adjustments for financial reporting

The balance in the Prepaid Insurance account is the advance premium for one year from September 1 of the
current year.
The buildings are expected to last 25 years, with an expected residual value of USD 30,000.

Salaries incurred but not paid as of December 31 amount to USD 8,400.
The balance in Prepaid Rent is for a one-year period that started March 1 of the current year.
Prepare the annual year-end adjusting journal entries at December 31.
Alternate problem B Among the account balances shown in the trial balance of Dunwoody Mail Station, Inc.,
at December 31 of the current year are the following:
Debits Credits
Supplies on hand $10,000
Prepaid insurance 6,000
Buildings 168,000
Accumulated deprecation and buildings $ 39,000
The inventory of supplies on hand at December 31 amounts to USD 3,000.
The balance in the Prepaid Insurance account is for a two-year policy taken out June 1 of the current year.
Depreciation for the buildings is based on the cost shown in the Buildings account, less residual value estimated
at USD18,000. When acquired, the lives of the buildings were estimated at 50 years each.
a. Prepare the year-end adjusting journal entries at December 31.

b. Open ledger accounts for each of the accounts involved, enter the balances as shown in the trial balance, post
the adjusting journal entries, and calculate year-end balances.
Alternate problem C Nevada Camping Equipment Rental Company occupies rented quarters on the main
street of Las Vegas. To get this location, the company rented a store larger than needed and subleased (rented) a
portion of the area to Max’s Restaurant. The partial trial balance of Nevada Camping Equipment Rental Company
as of 2010 December 31, is as follows:
NEVEDA CAMPING EQUIPMENT RENTAL COMPANY
Trial Balance
2010 December 31
Debits Credits
Cash $100,000
Prepaid Insurance 11,400
Supplies on Hand 20,000
Camping Equipment 176,000
Accumulated Depreciation—Camping Equipment $ 19,200
Notes Payable 40,000
Equipment Rental Revenue 1,500,000
Sublease Rental Revenue 8,800
Building Rent Expense 14,400
Salaries Expense 196,000
a. Salaries of employees amount to USD 300 per day and were last paid through Wednesday, December 27.
December 31 is a Sunday. The store is closed Sundays.
b. An analysis of the Camping Equipment account disclosed:
Balance, 2010 January 1 $128,000
Addition, 2010 July 1 48,000
Balance, 2010 December 31, per trial balance $176,000

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