1. Sample Problem
Chapter 13

2. Journalizing adjusting and reversing entries.
The data below concerns adjustments to be made at Vaughn Company.
INSTRUCTIONS
Record the adjusting entries in the general journal as of December 31, Use 25 as the first journal page number. Include descriptions.
ADJUSTMENTS
On October 1, 2007, the firm signed a lease for a warehouse and paid rent of $17,700 in advance for a six-month period.
On December 31, 2007, an inventory of supplies showed that items costing $1,840 were on hand. The balance of the Supplies account was $11,120.
A depreciation schedule for the firm’s equipment shows that a total of $8,200 should be charged off as depreciation for 2007.
On December 31, 2007, the firm owed salaries of $4,400 that will not be paid until January 2008.
On December 31, 2007, the firm owed the employer’s social security (6.2 percent) and Medicare (1.45 percent) taxes on all accrued salaries.
On September 1, 2007, the firm received a five-month, 8 percent note for $4,500 from a customer with an overdue balance.
Analyze: After the adjusting entries have been posted, what is the balance of the Prepaid Rent account on January 1, 2008?

3. Adjusting entry: Rent expense 8,850 Prepaid rent 8,850
a) On October 1, 2007, the firm signed a lease for a warehouse and paid rent of $17,700 in advance for a six month period.
Adjusting entry:
Rent expense 8,850
Prepaid rent 8,850
17,700/6 = 2, ,950 x 3 = 8,850

4. Adjusting entry: Supplies expense 9,280 Supplies 9,280
b) On December 31, 2007, an inventory of supplies showed that items costing $1,840 were on hand. The balance of the Supplies account was $11,120
Adjusting entry:
Supplies expense 9,280
Supplies 9,280
11,120 – 1,840 = 9,280

5. Depreciation expense – equipment 8,200
c) A depreciation schedule for the firm’s equipment shows that a total of $8,200 should be charged off as depreciation for 2007
Adjusting entry:
Depreciation expense – equipment 8,200
Accumulated depreciation – equipment 8,200

6. Adjusting entry: Salaries expense 4,400 Salaries payable 4,400
d) On December 31, 2007, the firm owed salaries of $4,400 that will not be paid until January, 2008
Adjusting entry:
Salaries expense 4,400
Salaries payable 4,400

7. Social Security tax payable 272.80 Medicare tax payable 63.80
e) On December 31, 2007, the firm owed the employer’s social security (6.2%) and Medicare (1.45%) taxes on all accrued salaries.
Adjusting entry:
Payroll tax expense
Social Security tax payable
Medicare tax payable

8. Adjusting entry: Interest receivable 120 Interest income 120
f) On September 1, 2007, the firm received a five month, 8% note for $4,500 from a customer with an overdue balance.
Adjusting entry:
Interest receivable 120
Interest income 120
4500 x 8% x 4/12 = 120