116 Chapter 3 Aqusting Accounts for Financial Statements Problem 3-2A Preparing adjusting and subsequent journal entries P1 P2 P3 P4 Arnet Company's annual accounting period ends on December 31, 2019. The following information con cerns the adjusting entries to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Rent Receivable: Office Supplies: Prepaid Insurance Building: Accumulated Depreciation-Building: Salaries Payable: Unearned Rent; Rent Earned: Salaries Expense; Office a. The Office Supplies account started the year with a $4.000 balance. During 2019, the company pur. chased supplies for $13,400, which was added to the Office Supplies account. The inventory of sup. plies available at December 31, 2019, totaled $2,554. b. An analysis of the company's insurance policies provided the following facts. The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) Policy Cost Date of Purchase Months of Coverage Apr 1, 2017 Apr 1, 2018 August 1, 2019 24 36 12 $14,400 12,960 2.400 c. The company has 15 employees, who earn a total of $1.960 in salaries ench working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2019, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2020 d. The company purchased a building on January 1, It cost $960,000 and is expected to have a $45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $30,500. e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3,000 per month, starting on November 1, 2019. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again. t. On November 1, the company rented space to another tenant for $2,800 per month. The tenant paid five months' rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account Required Check 11 De Insurance Expense: $7,120 140 De Depreciation Expense. $30,500 1. Use the information to prepare adjusting entries as of December 31, 2019. 2. Prepare journal entries to record the first subsequent cash transaction in 2020 for parts c and e