A review of the ledger of Come-By-Chance Corporation at July 31, 2012, produces the following unadjusted data

Question:

A review of the ledger of Come-By-Chance Corporation at July 31, 2012, produces the following unadjusted data for the preparation of annual adjusting entries:

1. Note Receivable, July 31 unadjusted balance, $50,000: The note was issued on March 1, 2012, at an interest rate of 8%, and matures on February 28, 2013. The interest and principal are to be paid at maturity.

2. Prepaid Insurance, July 31 unadjusted balance, $11,700: The company has separate insurance policies on its building and its motor vehicles. Policy B4564 on the building was purchased on December 1, 2010, for $10,800. The policy has a term of two years. Policy A2958 on the vehicles was purchased on February 1, 2012, for $4,500. This policy has a term of 18 months.

3. Buildings, July 31 unadjusted balance, $444,000: The Company owns two buildings. The first was purchased on September 1, 1998, for $252,000 and has an estimated 30-year useful life. The second was purchased on May 1, 2006, for $192,000 and has an estimated 40-year useful life.

4. Unearned Revenue, July 31 unadjusted balance, $51,000: The selling price of a magazine subscription is $50 for 12 monthly issues. A review of subscription contracts reveals the following

Subscription Date _______Number of Subscriptions

November 1, 2011 ..............................................220

February 1, 2012 .................................................310

May 1, 2012 .........................................................490

............................................................................1,020

5. Salaries Payable, July 31 unadjusted balance, $0: There are nine salaried employees. Salaries are paid every Monday for the previous five-day workweek (Monday to Friday). Six employees receive a salary of $625 each per week, and three employees earn $750 each per week. July 31 is a Tuesday.

Instructions

(a) Prepare a calculation to show why the unadjusted balance in the Prepaid Insurance account is $11,700 and why the unadjusted balance in the Unearned Revenue account is $51,000.

(b) Prepare the adjusting journal entries at July 31, 2012.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...