Forbes Ltd’s annual accounting year ends on 30 June. It is 30 June 2019 and all of the 2019 entries except the following adjusting entries have been made. 

a. On 1 April 2019 the company borrowed $80 000 from a local bank at 5 per cent per annum interest. The principal and interest are payable on 30 June 2020. The borrowing was correctly recorded but no adjustment has been made for interest. 

b. On 1 March 2019 Forbes collected six months’ rent of $18 000. At that date Forbes debited Cash and credited Unearned rent revenue for $18 000. 

c. On 1 October 2018 Forbes paid a one-year premium for fire insurance, $18 000, for coverage starting on that date. Cash was credited and Prepaid insurance was debited for this amount. 

d. At 30 June 2019 wages earned by employees totalled $43 000. The employees will be paid in July 2019. 

e. On 30 June 2019 the company estimated it owed $7000 for 2019 electricity costs. The amount will be paid when the invoice is received in July 2019. 

f. Office supplies on hand at 30 June 2018 totalled $1000. Additional office supplies costing $2400 were purchased and debited to Office supplies (asset account). The count of supplies on hand at year-end was $800.

Required: 

1. Using the following headings, indicate the effect of each adjusting entry and the amount of the effect. 

Use + for increase, − for decrease and NE for no effect. 

2. Prepare the adjusting journal entries.

Transcribed Image Text:

a b C d CD e f Assets Liabilities Revenues Expenses