Ouellette Corporation began operations on January 2. Its year end is December 31, and it adjusts its

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Ouellette Corporation began operations on January 2. Its year end is December 31, and it adjusts its accounts annually. Selected transactions for the current year follow:

1. On January 2, purchased supplies for $4,100 cash. A physical count at December 31 revealed that $700 of supplies were still on hand.

2. Purchased a vehicle for $45,000 on April 1, paying $5,000 cash and signing a $40,000 bank loan for the balance. The vehicle is estimated to have a useful life of five years.

3. Purchased a $3,600, one-year insurance policy for cash on August 1. The policy came into effect on that date.

4. Received a $1,600 advance cash payment from a client on November 9 for services to be provided in the future. As at

December 31, half of these services had been completed.

5. On December 1, the company rented additional office space for a six-month period starting on December 1 for $1,200 each month. It paid rent for the months of December and January in advance on this date.

Instructions

(a) For each of the above situations, prepare the journal entry for the original transaction.

(b) For each of the above situations, prepare any adjusting entry required at December 31.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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