A review of the ledger of Napier Company at December 31, 2010, produces these data pertaining to
Question:
A review of the ledger of Napier Company at December 31, 2010, produces these data pertaining to the preparation of annual adjusting entries.
1. Prepaid Insurance $15,200. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2009, for $9,600. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2010, for $7,200. This policy has a term of 2 years.
2. Unearned Subscription Revenue $29,400: The company began selling magazine subscriptions on October 1, 2010 on an annual basis. The selling price of a subscription is $30. A review of subscription contracts reveals the following.
Subscription Number of
Start Date Subscriptions
October 1 ............ 280
November 1 ....... 300
December 1 ........ 400
980
3. Notes Payable, $40,000: This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1.
4. Salaries Payable $0: There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $600 each per week, and three employees earn $700 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.
Instructions
Prepare the adjusting entries at December 31, 2010.
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-0470239803
5th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso