Chapter 3, Problem 3.59AP

(Learning Objective 3: Adjust the accounts) Journalize the adjusting entry needed on December 31, the end of the current accounting period, for each of the following independent cases affecting Castaway Corporation. Include an explanation for each entry,

1. a. The details of Prepaid Insurance are as follows:

Prepaid Insurance
Jan 1	Bal	2,900
Mar 31		4,000

Castaway prepays insurance on March 31 each year. At December 31, $1,700 is still prepaid.

1. b. Castaway pays employees each Friday. The amount of the weekly payroll is $6,100 for a five-day work week. The current accounting period ends on a Wednesday.
2. c. Castaway has a note receivable. During the current year, Castaway has earned accrued interest revenue of $700 that it will collect next year.
3. d. The beginning balance of supplies was $3,000. During the year, Castaway purchased supplies costing $6,200, and at December 31 supplies on hand total $2,200.
4. e. Castaway is providing services for Blue Whale investments, and the owner of Blue Whale paid Castaway an annual service fee of $10,500. Castaway recorded this amount as Unearned Service Revenue. Castaway estimates that it has earned 60% of the total fee during the current year.
5. f. Depreciation for the current year includes Office Furniture, $3,800, and Equipment, $5,400.