91Ó°ÊÓ

A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2018.

Dr. Cr.

Supplies \( 2,700

Salaries and wages payable \) 1,500

Interest receivable 5,100

Prepaid insurance 90,000

Unearned rent –0–

Interest payable 15,000

Additional adjusting data:

1. A physical count of supplies on hand on December 31, 2018, totaled \(1,100.

2. Through oversight, the Salaries and Wages Payable account was not changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to \)4,400.

3. The Interest Receivable account was also left unchanged during 2018. Accrued interest on investments amounts to \(4,350 on December 31, 2018.

4. The unexpired portions of the insurance policies totaled \)65,000 as of December 31, 2018.

5. \(28,000 was received on January 1, 2018, for the rent of a building for both 2018 and 2019. The entire amount was credited to rent revenue.

6. Depreciation on equipment for the year was erroneously recorded as \)5,000 rather than the correct figure of \(50,000.

7. A further review of depreciation calculations of prior years revealed that equipment depreciation of \)7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

Instructions

(a) Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2018? (Ignore income tax considerations.)

(b) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2018? (Ignore income tax considerations.)

(c) Repeat the requirements for items 6 and 7, taking into account income tax effects (40% tax rate) and assuming that the books have been closed.

Step by step solution

01

Journal entries for part A

Date	Particulars	Debit ($)	Credit ($)
1.	Supplied Expense	1,600
	Supplies		1,600
	(Being supplies expense recorded)
2.	Salary and wages expense	2,900
	Salary and wages payable		2,900
	(Being salary and wage expense recorded)
3.	Interest Revenue	750
	Interest Receivable on Investment		750
	(interest revenue recorded)
4.	Insurance Expense	25,000
	Prepaid Insurance		25,000
	(Being Insurance expense recorded)
5.	Rent Revenue	14,000
	Unearned Rent revenue		14,000
	(Being rent revenue recorded)
6.	Depreciation expense	45,000
	Accumulated Depreciation		45,000
	(being Depreciation expense recorded)
7.	Retained Earnings	7,200
	Accumulated Depreciation		7,200
	(Being adjustment recorded)

02

Journal entries for part B

Date	Particulars	Debit ($)	Credit ($)
1.	Retained Earnings	1,600
	Supplies		1,600
	(Being adjustment recorded)
2.	Retained Earnings	2,900
	Salaries and wages Payable		2,900
	(Being adjustment recorded)
3.	Retained Earnings	750
	Interest receivables		750
	(Being adjustment recorded)
4.	Retained Earnings	25,000
	Prepaid Insurance		25,000
	(Being adjustment recorded)
5.	Retained Earnings	14,000
	Unearned Rent Revenue		14,000
	(Being adjustment recorded)
6.	Retained Earnings	45,000
	Accumulated Depreciation		45,000
	(Being adjustment recorded)
7.	Retained Earnings	7,200
	Accumulated Depreciation		7,200
	(Being adjustment recorded)

03

Journal entries for part C

Date	Particulars	Debit ($)	Credit ($)
6.	Retained Earnings	27,000
	Income taxes receivables	18,000
	Accumulated Depreciation		45,000
	(Being adjustment recorded)
7.	Retained Earnings	4,320
	Income taxes receivables	2,880
	Accumulated Depreciation		7,200
	(Being adjustment recorded)

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