Accrual adjustment entries! Need help before tutorial.. Parkes Ltd\'s annual acc
ID: 2466321 • Letter: A
Question
Accrual adjustment entries! Need help before tutorial..
Parkes Ltd's annual accounting year ends on 30 June. It is 30 June 2016 and all of the 2016 entries except the following adjusting entries have been made. On 1 April 2016 the company borrowed $40000 from a local bank at 5 per cent per annum interest. The principal and interest are payable on 30 June 2017. The borrowing was correctly recorded but no adjustment has been made for interest. On 1 March 2016 Parkes collected six months' rent of $16800. At that date Parkes debited Cash and credited Unearned rent revenue for $16 800. On 1 October 2016 Parkes paid a one-year premium for fire insurance, $18000, for coverage starting on that date. Cash was credited and prepaid insurance was debited for this amount. At 30 June 2016 wages earned by employees totalled $38000. The employees will be paid in July 2016. On 30 June 2016 the company estimated it owed $6000 for 2016 electricity costs. The amount will be paid when the invoice is received in July 2016. Office supplies on hand at 30 June 2016 totalled $1400. Additional office supplies costing $2400 were purchased and debited to Office supplies (asset account). The count of supplies on hand at year-end was $800.]Explanation / Answer
a) Interest Expense Dr 500 (40000*5%/12*3) Interest accrued Cr 500 b) Unearned rent revenue Dr 11200 ( 16800/6*4) Rent revenue Cr 11200 c) Insurance expenses Dr 13500 (18000/12*9) Prepaid insurance Cr 13500 date mentioned as 1 oct 2016 instead of 1 oct 2015 d) Wages expenses Dr 38000 Wages payable Cr 38000 e) Electricity expenses Dr 6000 Expenses payable Cr 6000 f) office supplies expense Dr 3000 (1400 + 2400 - 800) office supplies Cr 3000 date mentioned as 30 june 2016 instead of 30 june 2015