Chapter 3, Problem 10AP

On March 31, the end of the current fiscal year, the following information is available to assist Zun Cleaning Company’s accountants in making adjusting entries:

1. a. Zun’s Supplies account shows a beginning balance of $5,962. Purchases during the year were $10,294. The end-of-year inventory reveals supplies on hand of $3,105.
2. b. The Prepaid Insurance account shows the following on March 31:

The beginning balance represents the unexpired portion of a one-year policy purchased in January of the previous year. The September 1 entry represents a new oneyear policy, and the January 1 entry represents additional coverage in the form of a three-year policy.

1. c. The following table contains the cost and annual depreciation for buildings and equipment, all of which Zun purchased before the current year:

1. d. On December 1, the company completed negotiations with a client and accepted an advance of $32,000 for services to be performed monthly for a year. The $32,000 was credited to Unearned Services Revenue. (Round to the nearest dollar.)
2. e. The company calculated that, as of March 31, it had earned $9,200 on a $17,000 contract that would be completed and billed in January.
3. f. Among the liabilities of the company is a note payable in the amount of $600,000. On March 31, the accrued interest on this note amounted to $17,470.
4. g. On Saturday, April 3, the company, which is on a six-day workweek, will pay its regular employees their weekly wages of $22,000. (Round to the nearest dollar.)
5. h. On March 31, the company completed negotiations and signed a contract to provide services to a new client at an annual rate of $19,000, beginning April 1.

REQUIRED

1. 1. Prepare adjusting entries for each item listed above.
2. 2. CONCEPT ▶ Explain how the conditions for revenue recognition are applied to transactions e and h.