Clapton Guitar Company entered into the following transactions during 2016. [The transactions were properly recorded in permanent (balance sheet) accounts unless otherwise indicated.]

Date

Transaction

Jan. 25

Purchased $480 of office supplies.

Feb. 1

Rented a warehouse from Hendrix Company, paying 1 year’s rent of $3,600 in advance. Recorded the $3,600 payment as rent expense.

Mar. 1

Borrowed $10,000 from the bank, signing a 1-year note at an annual interest rate of 12%. The bank insisted on collecting the interest in advance, so it withheld the interest amount from the funds disbursed to Clapton. The company recorded the transaction as a debit to Cash, $8,800, a debit to Interest Expense, $1,200, and a credit to Notes Payable, $10,000.

May 1

Purchased office equipment for $15,000, paying $3,000 down and signing a 2-year, 12% (annual rate) note payable for the balance. The office equipment is expected to have a useful life of 10 years and a residual value of $1,500. Straight-line depreciation is appropriate.

May 31

Purchased a 3-year comprehensive insurance policy for $720.

Aug. 1

Sold land for $9,000. The purchaser made a $2,000 down payment and signed a 1-year, 10% note for the balance. The interest and principal will be collected on the maturity date.

Oct. 1

Rented a portion of the retail floor space to Harrison Inc. for $120 per month, collecting 8 months’ rent in advance. Recorded the $960 receipt as rent revenue.

Nov. 13

Issued checks to sales personnel totaling $900. The checks are advances for expected travel costs during the remainder of the year.

Required

On the basis of the preceding information, prepare journal entries to adjust Clapton’s books as of December 31, 2016.

Answer rating: 100% (QA)

Note All journal entries is to be passed as on December 312016 but different dates has been provided ... View the full answer