1.) For the adjusted entry for rent revenue and unearned rent revenue, why do you multiply $2,400 by 5/8?

2.) For the adjusted entry for interest receivable and interest revenue, explain why do you use 5/12.

3.) For the adjusted entry for interest expense and interest payable, please explain why you would use 10/12.

Handout 2 (redo ) The Happy Retail Store recorded the following transactions during 2017: Jan 25 Purchased $600 of office supplies. Rented a warehouse from Alpha Company, paying I year's rent of $4,800 in advance. Recorded the $4,800 payment as rent expense. Feb 1 Mar 1 Borrowed $20,000 from the bank, signing a I-year note at an annual interest rate of 12%, Purchased office equipment for $30,000, paying $6,000 down and signing a 2-year, 12% (annual rate) note payable for the balance. The office equipment is expected to have a useful life of 10 years and a salvage value of $3,000. Straight-line depreciation is used. Purchased a 3-year comprehensive insurance policy for S1,200. July I Aug. 1Sold land for $18,000. The purchaser made a $6,000 down payment and signed a 1- year, 10% note for the balance. The interest and principal will be collected on the maturity date. Rented a portion of the retail floor space to a florist for $300 per month, collecting8 months' rent in advance. Recorded the $2,400 receipt as rent revenue. Oct.1 On December 31, 2017, the following additional information is available 1. Property taxes are due on December 1, 2017. The company has not paid or recorded its $4,000 property taxes for 2017 2. The $500 December utility bill has not been recorded or paid. Salaries accrued but not paid total $1,200. The Office Supplies account had a balance of $300 on January 1, 2017. A physical count on December 31, 2017 showed $150 of office supplies on hand. On January 1,2009, the Buildings account and the Equipment account had balances of $200,000 and $130,000, respectively. The buildings are expected to have a $16,000 salvage value, while the equipment is expected to have a $4,000 salvage value at the end of their respective lives. They are being depreciated using the straight-line method over 20 and 10 years, respectively Income tax of $7,500 for 2017 is payable on March 15 of 2018. 3. 4. 5. 6. Required: On the basis of the preceding information (both the transactions and additional information), prepare AJEs to adjust the company's books as of December 31, 2017 Hint: There are 14 AJEs if you record three separate entries for depreciation, 13 AJEs if you record two, and 12 AJEs if you record one single compound entry Rent Revenue 1,500 1,500 Unearned Rent Revenue ($2,400 x 5/8) 500 Interest Receivable 500 Interest Revenue ($12,000 x 10% x5/12) Interest Expense 2,000 2,000 Interest Payable ($20,000 x 12%x10/12)