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Problem 3-2B Preparing adjusting and subsequent
Natsu Company's annual accounting period ends on October 31. 2019. The following information concerns the
a. The Office Supplies account started the fiscal year with a S600 balance. During the fiscal year, the company purchased supplies for S4,570, which was added to the Office Supplies account. The supplies available at October 31, 2019, totaled S800. Page 120
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. (Tear-end adjusting entries for Prepaid Insurance were properly recorded in all prior Escal years.)
Policy Date of Purchase Months of Coverage Cost
A...... April 1.201E 2A $6,000
B...... April 1.2019 36 7,200
C...... August 1.2019 12 1,320
C. The company has four employees, who earn a total of SI,000 for each workday. They are paid each Monday for their work in the five-day
workweek ending on the previous Friday. Assume that October 31. 2019, is a Monday, and all four employees worked the first day of that week. They will be paid salaries for five full days on Monday. November 7. 2019.
d. The company purchased a building on November 1, 2016, that cost S175,000 and is expected to have a S40,000 salvage value at the end of its predicted 25-year life. Annual depreciation is S5,400.
e. Because the company does not occupy the entire building it owns, it rented space to atenant at SI,000 per month, starling on September 1, 2019. The rent was paid on time on September 1. and the amount received was credited to the Rent Earned account. However, the October rent has not been paid. The company has worked out an agreement with the tenant, who has promised to pay both October and November rent in full on November 15. The tenant has agreed not to fall behind again.
f. On September 1, the company rented space to another tenant for S725 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 (1b) Dr. Insurance Expense. S4.730
(1d) Dr. Depreciation Expense. S5.400
1. Use the information to prepare adjusting entries as of October 31, 2019.
2. Prepare journal entries to record the first subsequent cash transaction in November 2019 for parts c and e.
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Chapter 3 Solutions
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