Devin Wolf Company has the following balances in selected accounts on December 31, 2017. Devin has a calendar year end.
Accounts Receivable.............................................$0
Accumulated Depreciation-Equipment........................0
Equipment......................................................7,000
Interest Payable....................................................0
Notes Payable................................................10,000
Prepaid Insurance.............................................2,100
Salaries Payable....................................................0
Supplies........................................................2,450
Unearned Revenue..........................................30,000
All the accounts have normal balances. The information below has been gathered at December 31, 2017.
1. Devin Wolf Company borrowed $10,000 by signing a 4%, one-year note on September 1, 2017.
2. A count of supplies on December 31, 2017, indicates that supplies of $900 are on hand.
3. Depreciation on the equipment for 2017 is $1,000.
4. Devin Wolf Company paid $2,100 for 12 months of insurance coverage on June 1, 2017.
5. On December 1, 2017, Devin Wolf collected $32,000 for consulting services to be performed evenly from December 1, 2017, through March 31, 2018.
6. Devin Wolf performed consulting services for a client in December 2017. The client will be billed $4,200. Payment from the customer is expected on January 15, 2018.
7. Devin Wolf Company pays its employees total salaries of $9,000 every Wednesday for the preceding five-day week (Monday through Friday). On Wednesday, January 3, 2018, employees were paid for the last five weekdays of 2017.
Instructions
(a) Prepare adjusting entries for the seven items described above.
(b) Prepare the appropriate subsequent cash entries if applicable.
TAKING IT FURTHER
During the year, the employees at Devin Wolf did not track the supplies they used. Explain how the supply expense for the year can be determined even though detailed usage records were not kept.