The following transactions and events for Stellar Corp. are being reviewed for possible adjusting entries at...

 

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The following transactions and events for Stellar Corp. are being reviewed for possible adjusting entries at December 31 (the end of its accounting period). 1. Equipment used in operations cost $420,000; it was purchased on July 1, which was 3.5 years before the current December 31 year-end. It has an estimated useful life of 12 years. Straight- line depreciation is used. 2. The company estimates an increase in Allowance for Doubtful Accounts of $3,000 is required to recognize accounts receivable of $300,000 at the net amount expected to be collected. 3. At the beginning of the year, office supplies amounted to $600. During the year, office supplies of $8,800 were purchased; this amount was debited to Office Supplies Expense. An inventory of office supplies at the end of the year showed $400 still available. However, the January 1 balance of $600 is still recorded in the Office Supplies account. 4. On July 1 the company paid a three-year insurance premium of $2,160; this amount was debited to Prepaid Insurance. 5. On August 1 the company borrowed $120,000 cash from Shar Bank. The loan was for 12 months at 9% interest payable at maturity date. 6. On December 31 salaries earned by employees but not yet paid (or recorded) was $18,000. Required: Prepare the adjusting entry (or entries) that are necessary, if any, on December 31, for each item 1 through 6. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. General Journal Account Name Dr. Cr. 7. On September 1, the company loaned $60,000 cash to another company. The loan was at 10% per year and was due in six months; interest is payable at maturity. Cash was credited for $60,000, and Note Receivable was debited on September 1 for $60,000. 8. On January 1, Shipping Supplies amounted to $200. During the year, shipping supplies that cost $4,000 were purchased and debited to Shipping Supplies. At the end of the year, a physical inventory count revealed that shipping supplies still available were $800. 9. At the end of the year, property taxes for the year of $59,000 were assessed on property owned by the company. The taxes are due no later than February 1 next year. The taxes have not been recorded on the books because payment has not yet been made. 10. The company borrowed $120,000 cash from the bank on December 1. A 60-day note payable was signed at 9% interest payable on maturity date. On December 1, Cash was debited and Note Payable credited for $120,000. 11. On July 1, the company paid the city a $1,000 license fee for the next 12 months. On that date, Cash was credited and License Expense debited for $1,000. 12. The company owns three SUVS used by its executives. A six-month maintenance contract on them was signed on October 1, whereby a local garage agreed to do "all the required maintenance." Payment was made for the following six months in advance; specifically, on October 1, Cash was credited and Repair Expense was debited for $9,600. Prepare the adjusting entry (or entries) that are necessary, if any, on December 31, for each item 7 through 12. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. General Journal Account Name Dr. The following transactions and events for Stellar Corp. are being reviewed for possible adjusting entries at December 31 (the end of its accounting period). 1. Equipment used in operations cost $420,000; it was purchased on July 1, which was 3.5 years before the current December 31 year-end. It has an estimated useful life of 12 years. Straight- line depreciation is used. 2. The company estimates an increase in Allowance for Doubtful Accounts of $3,000 is required to recognize accounts receivable of $300,000 at the net amount expected to be collected. 3. At the beginning of the year, office supplies amounted to $600. During the year, office supplies of $8,800 were purchased; this amount was debited to Office Supplies Expense. An inventory of office supplies at the end of the year showed $400 still available. However, the January 1 balance of $600 is still recorded in the Office Supplies account. 4. On July 1 the company paid a three-year insurance premium of $2,160; this amount was debited to Prepaid Insurance. 5. On August 1 the company borrowed $120,000 cash from Shar Bank. The loan was for 12 months at 9% interest payable at maturity date. 6. On December 31 salaries earned by employees but not yet paid (or recorded) was $18,000. Required: Prepare the adjusting entry (or entries) that are necessary, if any, on December 31, for each item 1 through 6. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. General Journal Account Name Dr. Cr. 7. On September 1, the company loaned $60,000 cash to another company. The loan was at 10% per year and was due in six months; interest is payable at maturity. Cash was credited for $60,000, and Note Receivable was debited on September 1 for $60,000. 8. On January 1, Shipping Supplies amounted to $200. During the year, shipping supplies that cost $4,000 were purchased and debited to Shipping Supplies. At the end of the year, a physical inventory count revealed that shipping supplies still available were $800. 9. At the end of the year, property taxes for the year of $59,000 were assessed on property owned by the company. The taxes are due no later than February 1 next year. The taxes have not been recorded on the books because payment has not yet been made. 10. The company borrowed $120,000 cash from the bank on December 1. A 60-day note payable was signed at 9% interest payable on maturity date. On December 1, Cash was debited and Note Payable credited for $120,000. 11. On July 1, the company paid the city a $1,000 license fee for the next 12 months. On that date, Cash was credited and License Expense debited for $1,000. 12. The company owns three SUVS used by its executives. A six-month maintenance contract on them was signed on October 1, whereby a local garage agreed to do "all the required maintenance." Payment was made for the following six months in advance; specifically, on October 1, Cash was credited and Repair Expense was debited for $9,600. Prepare the adjusting entry (or entries) that are necessary, if any, on December 31, for each item 7 through 12. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Ref. General Journal Account Name Dr.

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Depreciation expense 35000 Bad debt exp... View the full answer