On April 1, All Star of Toledo prepaid six months of rent, $4,200.
Requirements
1. Record the journal entry for the April 1 payment.
2. Record the adjusting entry required at April 30.
3. Using T-accounts, post the journal entry and adjusting
entry to the accounts involved and show their balances at April 30.
Requirement 1
Date
Accounts and Explanation
Apr. 1
Debit
Prepaid Rent
Credit
4,200
Cash
To record rent paid in advance.
4,200
Requirement 2
Date
Accounts and Explanation
Apr. 30
Rent Expense
Prepaid Rent
To record rent expense.
*Calculations:
$
4,200
6
$
700
Debit
700*
700*
Rent prepaid on April 1 for 6 months
months
Rent expense for April
Requirement 3
Apr. 1
Bal.
Prepaid Rent
4,200
700 Apr. 30
3,500
Credit
Apr. 30
Bal.
Rent Expense
700
700
On November 1, Camden Equipment had a beginning balance in the Office Supplies account of $1,300.
During the month, Camden purchased $1,400 of office supplies. At November 30, Camden Equipment
had $1,200 of office supplies on hand.
Requirements
1. Open the Office Supplies T-account, and enter the beginning balance and purchase of office supplies.
2. Record the adjusting entry required at November 30.
3. Post the adjusting entry to the two accounts involved, and show their balances at November 30.
Solution:
Requirement 1
Nov. 1
Office Supplies
1,300
1,400
Requirement 2
Date
Accounts and Explanation
Nov. 30 Supplies Expense
Office Supplies
To record office supplies used.
*Calculations:
$ 1,300
1,400
2,700
(1,200)
$ 1,500
Debit
1,500*
1,500*
Office supplies beginning balance
Office supplies purchased during the month
Office supplies balance before adjustment
Office supplies on hand
Office supplies used
Requirement 3
Nov. 1
Bal.
Office Supplies
1,300
1,500 Nov.30
1,400
1,200
Nov. 30
Bal.
Credit
Supplies Expense
1,500
1,500
On May 1, Chicago Gold Exchange paid cash of $28,800 for computers that are expected to remain useful for four years.
At the end of four years, the value of the computers is expected to be zero.
Requirements
1. Calculate the amount of depreciation for the month of May using the straight-line depreciation method.
2. Record the adjusting entry for depreciation on May 31.
3. Post the purchase of May 1 and the depreciation on May 31 to T-accounts for the following accounts:
Computer Equipment, Accumulated Depreciation—Computer Equipment, and Depreciation Expense—
Computer Equipment. Show their balances at May 31.
4. What is the computer equipment’s book value on May 31?
Requirement 1
Straight-line depreciation per month = (Cost – Residual Value) / Useful Life
= ($28,800 – $0) ÷ 4 years
= $7,200 per year / 12 months
= $600
Requirement 2
Date
May 31
Accounts and Explanation
Depreciation Expense—Computer Equipment
Accumulated Depreciation—Computer Equipment
To record depreciation on computer equipment.
Debit
600
Credit
600
Requirement 3
May 1
Bal.
Computer Equipment
28,800
28,800
Accumulated Depreciation—
Computer Equipment
600 May 31
600 Bal.
Depreciation Expense—
Computer Equipment
May 31
600
Bal.
600
Requirement 4
Computer Equipment
Less: Accumulated Depreciation—Computer Equipment
Book value of computer equipment
$28,800
(600)
$28,200