For each of the following independent situations, give the journal entries to adjust and correct the books at the end of 2020.  In all situations you are to assume that the company in question closes its books on December 31 of each year and that reversing entries have been properly recorded where needed except as indicated. 

ADJUSTING ENTRIES
The trial balance before adjustments on December 31, 2020 shows Prepaid Insurance at $1,500.  The insurance coverage consists of one policy that expires on April 1 each year.  The renewal premium paid on April 1 for one year in advance was identical to the premium paid the previous year.

Rent on unused space is received on May 1 each year for one year in advance.  The Unearned Rent account is reported at $1,720 on the trial balance before adjustments on December 31, 2020.  The rent received on May 1, 2020, was 10% higher than the rent received on May l of the previous year.

The Prepaid Insurance account is reported at $800 on the December 31, 2020 unadjusted trial balance.  Analysis of the insurance coverage reveals that the company has two policies that were acquired at the same premium:
 
Policy A for 3 years was acquired on January 1, 2018.
Policy B for 2 years was acquired on January 1, 2020.

The Allowance for Doubtful Accounts was reported at $3,100 on the December 31, 2019 balance sheet.  During 2020 accounts receivable in the amount of $4,000 were written off while accounts receivable previously written off in the amount of $500 were recovered.  The company adjusts the Allowance for Doubtful Accounts to reflect 5% of outstanding accounts receivable at year end.  Accounts receivable amounted to $75,000 at the end of 2020.                      

The company amortizes the cost of patents over a life of 10 years using the straight line method.  A patent acquired on January 1, 2017 is reported at $10,500 on the trial balance before adjustments on December 31, 2020.

Accrued salaries amounted to $2,300 on December 31, 2020.  The salary accrual recorded at the end of the previous year in the amount of $1,800.

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Working Notes WN 1 Since given 2 polices were acquired at the same premium Then Let the ... View the full answer