Preparing, adjusting entries Assume that a firm closes its books once per year, on December 31. The firm employs a full-time bookkeeper and a part-time professional accountant who makes all necessary adjusting entries to prepare the financial statements on December 31. During the year, the firm uses the following simplified bookkeeping and transactions recording convention: When it receives cash, the firm debits cash and credits a revenue account; when it pays cash, the firm debits an expense account and credits cash.. The purposes of using this simplified transaction recording convention are (1) to achieve efficient recording of cash receipts and disbursements so that the firm always has an up- to-date balance in its cash account and (2) to avoid involving the professional accountant until the end of the year. On December 31, the professional accountant makes the adjusting entries necessary to properly record revenues and expenses of the period and calculate the correct balances in balance sheet accounts. Construct the adjusting entry required for each of the following scenarios.

a. On September 1, 2006, a tenant paid $24,000 rent for the one-year period starting at that time. The tenant debited the entire amount to Rent Expense and credited Cash. The tenant made no adjusting entries for rent between September 1 and December 31. Construct the adjusting entry to be made on December 31, 2006, to recognize the proper balances in the Prepaid Rent and Rent Expense accounts. What is the amount of Rent Expense for 2006?

b. Refer to part a. The tenant’s books for December 31, 20, after adjusting entries show a balance in the Prepaid Rent account of $ 16,000. This amount represents rent for the period January I through August 31, 2007. On September 1, 2007, the tenant paid $30,000 for rent for the one-year period starting September 1, 2007. The tenant debited this amount to Rent Expense and credited Cash but made no adjusting entries for rent during 2007. Construct the adjusting entry required on December 31, 2007. What is Rent Expense for 2007?

c. Refer to part b. The tenant’s books for December 31, 2007, after adjusting entries, show a balance in the Prepaid Rent account of $20.000. This amount represents lent for the period January 1 through August 31, 2008. On September 1, 2008, the tenant paid $18,000 for rent for the six-month period starting September 1, 2008. The tenant debited this amount to Rent Expense and credited Cash but made no adjusting entries during 2008. Construct the adjusting entry required on December 31, 2008. What is Rent Expense for 2008?

d. Whenever the firm makes payments for wages, it debits Wage Expense and credits Cash. At the start of April, the Wages Payable account had a balance of $5,000, representing wages earned but not paid during the last few days of March. During April, the firm paid $30,000 in wages, debiting the entire amount to Wage Expense. At the end of April, analysis of amounts earned since the last payday indicates that employees have earned wages of $4.000 that they have not received. These are the only unpaid wages at the end of April. Construct the required adjusting entry. What is Wage Expense for April?

e. The firm purchased an insurance policy providing one year’s coverage from May 1, 2005, and debited the entire amount to Insurance Expense. After the firm made adjusting entries, the balance sheet on December 31, 2005, correctly showed Prepaid Insurance of 53.000. Construct the adjusting entry that the firm must make on January 31, 2006, if the firm closes its books monthly and prepares a balance sheet for January 31, 2006.

f. For receipts a landlord collects related to an apartment building, the bookkeeper always credits Rent Revenue for cash received from tenants. At the beginning of 2007, the liability account Advances from Tenants had a credit balance of $25.000, representing collections from tenants for rental services the landlord will render during 2007. During 2007, the firm collected $250,000 from tenants it debited Cash and credited Rent Revenue. It made no adjusting entries during 2007. At the end of 2007, analysis of the individual accounts indicates that of the amounts already collected. $30,000 represents collections for rental services the landlord will provide to tenants during 2008. Present the required adjusting entry. What Is Rent Revenue for 2007?

g. When the firm acquired new equipment costing $10,000 on January 1, 2005, the bookkeeper debited Depreciation Expense and credited Cash for $10,000 but made no further entries for this equipment during 2005. The equipment has an expected service life of five years and an estimated salvage value of zero. Construct the adjusting entry required before the accountant can prepare a balance sheet for December 31, 2005.