s 1. a. The entry to adjust item #2 is Insurance expense 24,000 c. Insurance expense 1,000 b. Prepaid insurance Insurance expense 1,000 Prepaid insurance 24,000 Prepaid insurance 1,000 d. No adjustment 1,000 2. The entry to adjust item #10 is a. Salaries expense 48,000 c. Accrued payroll 48,000 Accrued payroll 48,000 b. Accrued payroll 48,000 Salaries expense 24,000 Cash 72,000 Salaries expense 48,000 d. No adjustment 3. The entry to adjust item #12 is a. Interest expense 26,667 c. Interest expense Interest payable 26,667 Interest payable 26,667 3,333 b. Interest expense 30,000 Cash 30,000 Interest payable 30,000 d. No adjustment 4. The entry to adjust item #13 a. Machinery 254,000 c. No adjustment AP - others 254,000 b. AP - others 254,000 Machinery 254,000 d. No adjustment since payment was made on Jan. 15, 2008 5. The entry to adjust item #14 a. Dividends declared 160,000 c. No adjustment Dividends payable 160,000 b. Dividends payable 160,000 d. No adjustment since payment Dividends declared 160,000 was made on Jan. 15, 2008. 3 Questions 1. a. The entry to adjust item #2 is Insurance expense 24,000 c. Insurance expense 1,000 b. Prepaid insurance Insurance expense 1,000 Prepaid insurance 24,000 Prepaid insurance 1,000 d. No adjustment 1,000 2. The entry to adjust item #10 is a. Salaries expense 48,000 c. Accrued payroll 48,000 Accrued payroll 48,000 b. Accrued payroll 48,000 Salaries expense 24,000 Cash 72,000 Salaries expense 48,000 d. No adjustment 3. The entry to adjust item #12 is a. Interest expense 26,667 c. Interest expense Interest payable 26,667 Interest payable 26,667 3,333 b. Interest expense 30,000 Cash 30,000 Interest payable 30,000 d. No adjustment 4. The entry to adjust item #13 a. Machinery 254,000 c. No adjustment AP - others 254,000 b. AP - others 254,000 Machinery 254,000 d. No adjustment since payment was made on Jan. 15, 2008 5. The entry to adjust item #14 a. Dividends declared 160,000 c. No adjustment Dividends payable 160,000 b. Dividends payable 160,000 d. No adjustment since payment Dividends declared 160,000 was made on Jan. 15, 2008. 3 Problem 2 In conjunction with your firm's examination of the financial statements of Ronryan Company as of December 31, 2007, you obtained from the voucher register the information shown in the work paper below. Item Entry Date Description Account Charged Amount 1. 12/18/07 Supplies, purchased FOB destination, 12/15/07; received, 12/17/07 15,000 Supplies on hand 2. 12/18/07 Auto insurance, 12/15/07 to 12/15/08 24,000 Prepaid insurance Questions 3. 12/21/07 Repair services; received 12/20/07 19,000 Repairs and Main. 1. a. 4. 12/21//07 Merchandise shipped FOB shipping point, 12/20/07; b. received, 12/24/07 12,300 Inventory The entry to adjust item #2 is Insurance expense 24,000 Prepaid insurance Insurance expense 1,000 Prepaid insurance 24,000 c. Insurance expense Prepaid insurance 1,000 1,000 d. No adjustment 1,000 5. 12/21/07 Payroll, 12/07/07 - 12/21/07 2. (12 working days) 69,000 Sal. and wages a. The entry to adjust item #10 is Salaries expense 48,000 6. 12/26/07 Subscription to Tax Journals Accrued payroll 48,000 for 2008 5,000 b. Accrued payroll 48,000 c. Accrued payroll 48,000 Salaries expense 24,000 Cash 72,000 Dues & subs Salaries expense 48,000 d. No adjustment 7. 12/28/07 Utilities for December 2007 24,000 Utilities expense 3. The entry to adjust item #12 is 8. 12/28/07 Merchandise shipped FOB a. Interest expense 26,667 c. Interest expense destination, 12/24/07; Interest payable 26,667 received, 1/2/08 111,000 Inventory b. Interest expense 30,000 Interest payable Cash 26,667 3,333 30,000 Interest payable 30,000 d. No adjustment 9. 12/28/07 Merchandise shipped FOB shipping point, 12/26/07; 4. received, 1/3/08 84,000 Inventory a. The entry to adjust item #13 Machinery 254,000 c. No adjustment AP - others 254,000 10. 1/5/08 Payroll 12/21/07-1/05/08 (12 working days. 4 working b. days in January) 72,000 Sal. and wages AP - others Machinery 254,000 254,000 11. 1/10/08 Merchandise shipped FOB destination, 1/03/08, 5. a. 2 b. The entry to adjust item #14 Dividends declared 160,000 Dividends payable Dividends payable 160,000 d. No adjustment since payment was made on Jan. 15, 2008 c. No adjustment 160,000 d. No adjustment since payment received, 1/10/08 38,000 Inventory 12. 1/14/08 Interest on bank loan, 10/10/07 to 01/10/08 30,000 Interest expense Dividends declared 160,000 was made on Jan. 15, 2008. 13. 1/15/08 Manufacturing equipment installed, 12/29/07 254,000 Machinery 14. 1/15/08 Dividends declared, 12/15/07 160,000 Dividends payable Accrued liabilities of 12/31/07 were as follows: Accrued payroll Accrued interest payable Dividends payable P 48,000 26,667 160,000 The accruals made on December 31, 2007 were reversed effective January 1, 2008. Review the data given above and prepare adjusting journal entries to correct the accounts on December 31, 2007. Assume that the company follows FOB terms for recording inventory purchases. 3