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.
a. On 1 April 2016 the company borrowed $40 000 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.
b. On 1 March 2016 Parkes collected six months' rent of $16 800. At that date Parkes debited Cash and credited Unearned rent revenue for $ 16 800.
c. 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.
d. At 30 June 2016 wages earned by employees totalled $38 000. The employees will be paid in July 2016.
e. On 30 June 206 the company estimated it owed $6000 for 2016 electricity costs. The amount will be paid when the invoice is received in July 2016.
f. 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.

Required:
1. Using the following headings, indicate the effect of each adjusting entry and the amount of the effect. Use + for increase, — for decrease and NE for no effect.

2. Prepare the adjusting journal entries.

Transcribed Image Text:

Assets Liabilities Revenues Expenses (a) (b) (c) (d) (e] (A)