INTERMEDIATE ACCOUNTING 1 ---CHAPTER 3 PROBLEMS

Problem 1

The following data relate to the accounts of Edmiston Company.

a. Unpaid salaries and wages at year end amount to $750.

b. Edmiston Company owns bonds of another corporation that pay annual interest of $800. These bonds were purchased on April 1, 2017, and the next interest payment will be received on April 1, 2018.

c. A two-year insurance policy was purchased on June 1, 2017. The $1,200 insurance premium was paid on that date and was debited to Prepaid Insurance.

d. Service Revenue was credited for $900 on June 1, 2017. The amount represents a one-year advance payment for services to be performed by Edmiston Company through May 31, 2018.

e. The Supplies account shows a balance of $2,500 on December 31, 2017. A physical count of the supplies on hand at this date reveals a total of $1,000 available.

f. Interest has accrued on a $20,000, 6% note payable, issued on May 1. Instructions: Prepare the necessary annual adjusting journal entries indicated by each item for the year ended December 31, 2017.