Crawford's Department Store is completing the accounting process for the year just ended, December 31, 2011. The
Question:
Crawford's Department Store is completing the accounting process for the year just ended, December 31, 2011. The transactions during 2011 have been journalized and posted. The following data with respect to adjusting entries are available:
a. Office supplies inventory at January 1, 2011, was \(\$ 350\). Office supplies purchased and debited to office supplies inventory during the year amounted to \(\$ 900\). The year-end inventory showed \(\$ 200\) of supplies on hand.
b. Wages earned during December 2011, unpaid and unrecorded at December 31, 2011, amounted to \(\$ 2,700\). The last payroll date was December 28; the next pay date will be January 6, 2012.
c. Three-fourths of the basement of the store is rented for \(\$ 1,200\) per month to another merchant, M. Riesman. Riesman sells compatible, but not competitive, merchandise. On November 1, 2011, the store collected six months' rent in the amount of \(\$ 7,200\) in advance from Riesman and credited the amount to deferred rent revenue.
d. The remaining basement space is rented to Rita's Specialty Shop for \(\$ 500\) per month, payable monthly. On December 31, 2011, the rent for November and December 2011 was neither collected nor recorded. Collection is expected on January 10, 2012.
e. The store used delivery equipment that cost \(\$ 30,000\) and was estimated to have a useful life of four years and a residual value of \(\$ 4,000\) at the end of the four years. Assume depreciation for a full year for 2011. The asset will be depreciated evenly over its useful life.
f. On July 1, 2011, a one-year insurance premium amounting to \(\$ 1,800\) was paid in cash and debited to prepaid insurance. Coverage began on July 1, 2011.
g. Crawford's operates an alteration shop to meet its own needs. The shop also does alterations for M. Riesman. At the end of December 31, 2011, Riesman had not paid for alterations completed, amounting to \(\$ 750\). This amount has not yet been recorded as alteration shop revenue. Collection is expected during January 2012.
Required:
1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Using the process illustrated in the chapter, prepare for each situation the adjusting entry that should be recorded for Crawford's at December 31, 2011.
Step by Step Answer:
Financial Accounting
ISBN: 9780070001497
4th Canadian Edition
Authors: Patricia A. Libby, Daniel Short, George Kanaan, Maureen Libby Gowing, Robert Libby