Problem 1 Record year-end adjusting entries
Below are transactions for Hurricane Company during 2015.
a. On October 1, 2015, Hurricane lends $7300 to another company. The other company signs a note indicating principal and 8% interest will be paid to Hurricane on September 30, 2016.
b. On November 1, 2015, Hurricane pays its landlord $1950 representing rent for the months of November through January. The payment is debited to Prepaid Rent for the entire amount.
c. On August 1, 2015, Hurricane collects $11,160 in advance from another company that is renting a portion of Hurricane's factory. The $11,160 represents one year's rent and the entire amount is credited to Unearned Revenue.
d. Depreciation on machinery is $3,800 for the year.
e. Salaries for the year earned by employees but not paid to them or recorded are $3,300.
f. Hurricane begins the year with $650 in supplies. During the year, the company purchases $3,800 in supplies and debits that amount to Supplies.
At year-end, supplies costing $1,800 remain on hand.
Required: Record the necessary adjusting entries at December 31, 2015, for Hurricane Company for each of the situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded.
Problem 2 Record adjusting entries and determine their effect on net income
The information necessary for preparing the 2015 year-end adjusting entries for Gamecock Advertising Agency appears below. Gamecock's fiscal year-end is December 31.
a. On July 1. 2015. Gamecock receives $5.500 from a customer for advertising services to be given evenly over the next 10 months Gamecock credits Unearned Revenue.
b. At the beginning of the year, Gamecock's depreciable equipment has a cost of $39.000. a six-year life. and no salvage value. The equipment is depreciated evenly (straight-line depreciation method) over the six years.
c. On May 1, 2015. the company pays $4,200 for a two-year fire and liability insurance policy and debits Prepaid Insurance
d. On September 1. 2015 the company borrows $15.000 from a local bank and signs a note. Principal and interest at 9% wilt be paid on August 31. 2016.
e. At year-end there is a $2.450 debit balance in the Supplies (asset) account. Only $950 of supplies remains on hand.
Required :
Record the necessary adjusting entries on december 31, 2015 No prior adjustments have been made during 2015