Preparing adjusting and subsequent journal entries Natsu Co. records prepaid expenses in balance sheet accounts. Natsu’s annual accounting period ends on October 31, 2008. The following information concerns the adjusting entries that need to be recorded as of that date.

a. The Office Supplies account started the fiscal year with a \($600\) balance. During the fiscal year, the company purchased supplies for \($4,570\), which was added to the Office Supplies account. The supplies available at October 31, 2008, totaled \($800.\)

b. An analysis of the company’s insurance policies provided the following facts.

The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior fiscal years.)
c. The company has four employees, who earn a total of \($1,000\) for each workday. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that October 31, 2008, is a Monday, and all five employees worked the first day of that week. They will be paid salaries for five full days on Monday, November 7, 2008.

d. The company purchased a building on November 1, 2007, that cost \($175,000\) and is expected to have a \($40,000\) salvage value at the end of its predicted 25-year life. Annual depreciation is \($5,400.\)
Required Use the information to prepare adjusting entries as of October 31, 2008.

Transcribed Image Text:

Months of Policy Date of Purchase Coverage Cost ABC April 1, 2007 24 $6.000 April 1, 2008 36 7,200 August 1, 2008 12 1,320