This exercise will illustrate the preparation of adjusting entries from an unadjusted trial balance… 1 answer below »

This exercise will illustrate the preparation of adjusting entries from an unadjusted trial balance and additional data.

Tammy Equipment Rentals, Inc. began business in 2010. The following list of accounts and their balances represents the unadjusted trial balance of Tammy”s Equipment Rentals, Inc. at December 31, 2014, the end of the annual accounting period.

 Debit

Credit

Cash

$16,500

Prepaid Insurance  

4,320

Supplies  

13,200

Land  

62,000

Building   

50,000

Equipment

130,000  

 Accumulated Depreciation—Buildinq  

$10,000

Accumulated Depreciation—Fqiiipment

57,000

Note Payable  

50.000

Accounts Payable  

9,310

Unearned Rent Revenue  

10,200

Common Stock  

30,000

Retained Earnings  

60,660

Dividends  

31,000

Rent Revenue  

161,960

Salaries and Wages Expense  

70,600

Interest Expense  

3,500

Miscellaneous Expense  

3,010

$384,130

$384,130

Additional data: On November 1, 2014, Tammy received $10,200 rent from a lessee for a 12-month equipment lease beginning on that date and credited Unearned Rent Revenue for the entire collection. Per a physical inventory at December 31, 2014, Tammy determines that supplies costing $2,200 were on hand at the balance sheet date. The cost of supplies is debited to an asset account when purchased. Prepaid Insurance contains the premium cost of a policy that is for a 3-year term and was taken out on May 1, 2014. The cost of the building is being depreciated at a rate of 5% per year. The cost of the equipment is being depreciated at a rate of 10% per year. The note payable bears interest at 12% per year. Interest is payable each August 1. The $50,000 principal is due in full on August 1, 2017. At December 31, 2014, Tammy has some equipment in the hands of renters who have used the equipment but have not yet been billed. They will make payment of $1,400 on January 2, 2015. Employees are paid total salaries of $6,400 every other Friday for a two-week period ending on that payday. December 31, 2014 falls on a Monday. The last payday of the year is the last Friday in the year. The work week is Monday through Friday.

Instructions

(a) Prepare the year-end adjusting entries in general journal form using the information above.

(b) Prepare an adjusted trial balance at December 31, 2014.

 

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