eBook

Adjusting Entries

Reynolds Computer Service offers data processing services to retail clothing stores. The following data have been collected to aid in the preparation of adjusting entries for Reynolds Computer Service for the current year:

a$.$ Computer equipment was purchased from IBM $3$ years ago at a cost of $$540,000.$ Annual depreciation is $$127,800.$

b$.$ A fire insurance policy for a $2-$year period beginning on September $1$ was purchased from Good Hands Insurance Company for $$12,480$ cash. The entire amount of $t$ prepayment was debited to prepaid insurance. $($Assume that the beginning balance of prepaid insurance was $$0$ and that there were no other debits or credits to the account during the year.$)$

c$.$ Reynolds has a contract to perform the payroll accounting for Dayton's Department Stores. On December $31,$$$6,770$ of services have been performed under this contract but are unbilled.

d$.$ Reynolds rents $12$ computer terminals for $$67$ per month per terminal from Extreme Terminals Inc. At December $31,$ 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 $31,$ Reynolds has earned $$1,880$ for computer time used by Perry's Tax Service during December.

Required:

Prepare adjusting entries for each of the transactions. If an amount box does not

require.an entry, leave it blank.

a$.$