A review of the ledger of Chance Corporation at its year end, July 31, 2018, produces the following unadjusted data for the preparation of annual adjusting entries:

1. Prepaid Insurance, July 31, 2018, unadjusted balance, $9,600: The Company purchased an insurance policy on December 1, 2016, with a two-year term, which expires November 30, 2018.

2. Buildings, July 31, 2018, unadjusted balance, $252,000: The Company owns a building purchased on September 1, 2014, for $252,000, with an estimated 30-year useful life. The company uses straight-line depreciation.

3. Unearned Revenue, July 31, 2018, unadjusted balance, $42,500: The selling price of a digital magazine subscription is $60 for 24 monthly issues delivered over a two-year period. The company had sold 1,000 subscriptions on January 1, 2017, during a special promotion.

4. Salaries Payable, July 31, 2018, unadjusted balance, $0: There are nine salaried employees. Salaries are paid every Monday for the previous five-day workweek (Monday to Friday). Six employees receive a salary of $625 each per week, and three employees earn $750 each per week. July 31 is a Tuesday.

Instructions

(a)

1. How much insurance expires per month for the building?

2. Prepare a calculation to show why the unadjusted balance in the Prepaid Insurance account is $9,600 at July 31, 2018.

3. What was the original purchase price of the policy on December 1, 2016?

4. How much should the adjusted balance in the Prepaid Insurance account be at July 31, 2018?

(b)

1. How much is annual depreciation expense for the building?

2. Calculate the unadjusted balance in the Accumulated Depreciation-Buildings account as at July 31, 2018.

3. How much should the adjusted balance in the Accumulated Depreciation-Buildings account be at July 31, 2018?

(c)

1. How much is earned by the company per month for the magazine subscriptions?

2. Prepare a calculation to show why the unadjusted balance in the Unearned Revenue account is $42,500 at July 31, 2018.

3. How much should the adjusted balance in the Unearned Revenue account be at July 31, 2018?

(d)

1. How much salary was paid on the last payday, Monday, July 30?

2. How much, if any, salary is owed to the employees on July 31?

3. How much salary will be paid on the next payday, Monday, August 6?

(e) Prepare the adjusting journal entries required for each of the above four items at July 31, 2018.

Convert cash to accrual basis; prepare financial statements.