1. Prepare adjusting entries for each of the transactions.
2. Conceptual Connection: What would be the effect on the balance sheet and the income statement if the accountant failed to make the above adjusting entries?

A. Computer equipment was purchased from IBM in 2016 at a cost of $550,000. Annual depreciation is $130,000.

B. A fire insurance policy for a two-year period beginning September 1st 2019, was purchased from Good Hands Insurance Company for $13,680 cash. The entire amount of the prepayment was debited to prepaid Insurance. ( Assume that the beginning balance of prepaid insurance was $0 and that there were no other debits or credits account during 2019. )

C. Reynolds has a contract to perform the payroll accounting for Dayton's Department store. At the end of 2019, $5,750 of services have been performed under this contract but are unbilled.

D. Reynolds rent 10 computer terminals for $54 per month per terminal from Extreme Terminals Inc. At December 31, 2019, Reynolds owes Extreme Terminals for half a month's rent on each terminal. The amount owed is unrecorded.

E. Perry's Tax Service prepays rent for time on Reynolds' computer. When payments are received from Perry's Tax Service, Reynolds credits unearned rent revenue. At December 31,2019, Reynolds has earned $1,840 for computer time used by Perry's Tax Service during December 2019.

Answer rating: 100% (QA)

Adjusting Entries and Conceptual Connection 1 Adjusting Entries A Depreciation Date December 31 2019 Account Titles and ExplanationDebitCredit Depreci... View the full answer