Accounting Sample!!?

Question

Will Corporation prepares monthly financial statements. Below are listed some selected accounts and their balances on the September 30 trial balance before any adjustments have been made for the month of September.

Will CORPORATION
Trial Balance (Selected Accounts)
September 30, 2004
————————————————————————————————————
Debit Credit
Computer supplies DR 2,700
Prepaid insurance DR 4,200
Office Equipment DR 16,200
Accumulated Amortization—Office Equipment $ 900
Unearned Rent Revenue 1,200
Note Payable 15,000
(Note: Debit column does not equal credit column because this is a partial listing of selected account balances.)

An analysis of the account balances by the company's accountant provided the following additional information:
1. A physical count of office supplies revealed $600 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for $6,000.
3. Office equipment is amortized $4,500 per year.
4. The amount of rent received in advance that remains unearned at September 30 is $800.
5. The company borrowed $12,000 on August 1 and in return signed a one-year 8% note payable. No interest or principal payments are required until the note matures in 2005.

Required
Using the above additional information, prepare the adjusting entries that should be made by Will Corporation on September 30. Include explanations with your journal entries

Answer 1

1. A physical count of office supplies revealed $600 on hand on September 30
Dr Office supplies expense 2,100
Cr Office supplies 2,100
(to recognise the amt used up)

2. A two-year life insurance policy was purchased on June 1 for $6,000
Dr Insurance expense 250
Cr Prepaid insurance 250
(to expense off 1 month's insurance)
I assume that insurance expense has been recognised up to Aug. 2004 so now it's only necessary to take up Sept's expense.

3. Office equipment is amortized $4,500 per year
Dr Amortization expense 375
Cr Accumulated amortization 375
(being 1 month's amortization)
Actually this should be depreciation. I assume depn has been taken up till Aug 2004

4. The amount of rent received in advance that remains unearned at September 30 is $800
Dr Unearned rent revenue 400
Cr Rent revenue 400
(to recognise rent revenue earned)

5. The company borrowed $12,000 on August 1 and in return signed a one-year 8% note payable. No interest or principal payments are required until the note matures in 2005
Dr Interest expense 80
Cr Interest payable 80
(being interest on $12,000 note payable accrued for month of Sept)

Answer 2

DR Office/Comp Supplies 2100.
CR Office/Comp Supplies Exp 2100
To adjust for Sept usage of supplies
DR Insurance Exp 250.00
CR Prepaid Ins 250.00
Monthly insurance expense (assumes other months were done)
DR Amort Exp 375.00
CR Accum Amort 375.00
To Exp Sept amort
DR Unearned Rent 400.00
CR Rent Income 400.00
To show income for period
DR Cash 12000.00
CR Notes Payable 12000.00
To record receipt of loan

Answer 3

Do a Control Account - everything in and everything out and you should find the answer.