Prepare the necessary adjusting entries at December 31, 2021, for the Microchip Company for each of the following situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded.1. On October 1, 2021, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022.2. On November 1, 2021, the company paid its landlord $6,000 representing rent for the months of November through January. Prepaid rent was debited.3. On August 1, 2021, collected $12,000 in advance rent from another company that is renting a portion of Microchip’s factory. The $12,000 represents one year’s rent and the entire amount was credited to deferredrent revenue.4. Depreciation on office equipment is $4,500 for the year.5. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,000. The company records vacation pay as salaries expense.6. Microchip began the year with $2,000 in its asset account, supplies. During the year, $6,500 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,250 remain on hand.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Prepare the necessary
1. On October 1, 2021, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022.
2. On November 1, 2021, the company paid its landlord $6,000 representing rent for the months of November through January. Prepaid rent was debited.
3. On August 1, 2021, collected $12,000 in advance rent from another company that is renting a portion of Microchip’s factory. The $12,000 represents one year’s rent and the entire amount was credited to deferred
rent revenue.
4.
5. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,000. The company records vacation pay as salaries expense.
6. Microchip began the year with $2,000 in its asset account, supplies. During the year, $6,500 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,250 remain on hand.
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