Prepare in journal entry form the adjusting journal entries for the following items.
- On June 1, 2013 a 36-month insurance policy was purchased for $24,000.
- On January 1, 2013 Hullie & Oates paid Gretsky Advertising $48,000 for three years of advertising services. Equal services are provided each year.
- Hullie & Oates needed some additional storage space so on November 1, 2013 they rented a unit for an annual rate of $18,500. The entire amount was expensed when paid.
- $5,800 of store supplies were purchased during the year and the asset store supplies was increased. $3,200 of these supplies were used during the year.
- $7,775 of office supplies were purchased during the year and were immediately expensed. $1,250 of these supplies remained at the end of 2013.
- On August 1, 2013, Hullie & Oates issued a 9-month note receivable to Shanahan Co. at an annual interest rate of 5%. Principle and interest will be paid at the end of the 9-months. The note was recorded in Notes Receivable and is the only note outstanding.
Depreciation for the year is based on the following:
Straight line depreciation
- Store equipment - Assets were held for the entire year; Residual Value = $15,000; Service life is estimated to be 10 years.
- Office equipment - Assets were held for the entire year; Residual Value = $8,000; Service life is estimated to be 2 years.
- Sales salaries of $8,400 and office salaries of $6,500 remained unpaid at 12/31/13.
- On October 1, 2013, Hullie & Oates rented a portion of one store to Twist & Chase Co. The contract was for 6 months and Hullie & Oates required the 6 months of cash upfront on October 1st. The rent is being earned equally over the next 6 months. When cash was received, unearned rent was appropriately recorded.
- The note payable was outstanding the entire year and a 6.5% interest rate exists on the note. No interest has been recorded for the year.
- Based on past experience, Hullie & Oates calculates bad debt expense at 1% of net sales for the year.