DETERMINATION OF REVENUE AND EXPENSE AMOUNTS. Reynolds Computer Service offers data processing services to retail clothing stores. The following data have been collected to aid in the preparation of adjustments for Reynolds Computer Service for 19x8:

= a)

—b)

c)

d)

e)

Computer equipment was purchased from IBM in 19x5 at a cost of $540,000.

Expected life is 7 years and expected residual value is $32,500.

A fire insurance policy for a 2-year period beginning September 1, 19x8, was purchased from Aetna for $10,320 cash. The entire amount of the prepayment was debited to prepaid insurance. (Assume that the beginning balance of prepaid insurance was zero and that there were no debits or credits to that account during 19x8.)

Reynolds has a contract to perform the payroll accounting for Dayton’s Department Stores. At the end of 19x8, services amounting to $8,400 had been performed under this contract but are unbilled.

Reynolds rents 12 computer terminals for $40 per month per terminal from General Electric Capital Corporation. At December 31, 19x8, Reynolds owes General Electric Capital for half a month’s rent on each terminal. The amount owed is unrecorded.

Perry’s Tax Service prepays rent for time on Reynolds’ computer. When payments are received from Perry’s Tax Service, Reynolds credits unearned revenue. At December 31, 19x8, Reynolds has earned $1,430 for computer time used by Perry’s Tax Service during December 19x8.

REQUIRED:

Prepare adjusting entries for each of these items after computing the proper amount of the revenues and expenses.