In recording prepaid expenses and unearned revenues, Nickle Company debits the disbursements to expense accounts and credits
Question:
In recording prepaid expenses and unearned revenues, Nickle Company debits the disbursements to expense accounts and credits the receipts to revenue accounts. The following information was available on December 31, 1990, the end of the Nickle Company's annual accounting period.
a. The Store Supplies account had an \(\$ 880\) debit balance at the beginning of the year, \(\$ 1,790\) of supplies were purchased during the year, and an inventory of unused supplies at the year-end totaled \(\$ 1,320\).
b. An examination of insurance policies showed two policies, as follows:
Insurance Expense was debited for the cost of each policy at the time of its purchase. However, the correct amount of Prepaid Insurance was recorded during the adjustment processes at the end of 1988 and 1989.
c. On July 20, 1990, Nickle Company agreed to provide consulting services to a client and received advance payment of \(\$ 12,900\). At year-end, the client agreed that two thirds of the services had been provided.
d. The company occupies most of the space in its building but it also rents space to one tenant. The tenant agreed on October 1 to rent a small amount of space at \(\$ 900\) per month, and on that date paid four months' rent in advance.
e. The Office Supplies account had a \(\$ 620\) debit balance at the beginning of the year and \(\$ 1,350\) of supplies were purchased during the year. A year-end inventory of office supplies indicated that supplies amounting to \(\$ 1,050\) had been used during the year.
\section*{Required}
Prepare adjusting journal entries dated December 31,1990 , prior to the preparation of annual financial statements. For item (b), prepare a separate adjusting entry for each insurance policy.
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