Question

Below are transactions for Wolverine Company during 2021.

(1) On December 1, 2021, Wolverine receives $4,000 cash from a company that is renting office space from Wolverine. The payment, representing rent for December and January, is credited to Deferred Revenue.
(2) Wolverine purchases a one-year property insurance policy on July 1, 2021, for $13,200. The payment is debited to Prepaid Insurance for the entire amount.
(3) Employee salaries of $3,000 for the month of December will be paid in early January 2022.
(4) On November 1, 2021, the company borrows $15,000 from a bank. The loan requires principal and interest at 10% to be paid on October 30, 2022.
(5) Office supplies at the beginning of 2021 total $1,000. On August 15, Wolverine purchases an additional $3,400 of office supplies, debiting the Supplies account.

Record the necessary adjusting entries at December 31, 2021, for Wolverine Company.

Answer 1

Answer:

Check the explanation for the answer

Explanation:

Wolverine Company

Adjusted journal entries for the year ended 31st December 2021.

DATE         PARTICULARS                                    DEBIT ($)   CREDIT ($)

1/12/2021 Rent receivable                                        4000

                       Deferred revenue                                                          4000

                      Being the correction of rent deferred

                      revenue

1/7/2021        Insurance expenses                                13200

                     Prepaid insurance                                                            13200

                     Being the correction of error of prepaid

                     insurance      

1/1/2020      Salaries expenses                                    3000

                    Salaries payable                                                                3000

                    Being the correction of salaries

                   expenses

1/11/2021      Loan interest expenses                            1500

                    Loan payable                                                                      1500

                    Being the  correction of loan

                    expenses

1/8/2020      Office supplies expenses                         4400

                    Prepaid office supplies                                                        4400

                   Being the correction of error of office

                   supplies

                                  Total                               26100            26100

The word ’journal’ means a dairy or day books which is use for recording of any financial transaction. It helps in reducing the possibility of an error when transactions are first recorded. The journal is not part of the double entry system; its purpose is giving details of entries, which will appear in the Ledger.  

Deferred revenue which can also be refer to as unearned revenue are income receive on goods or services which have not been rendered to the customer, because the service has not been rendered to the payer, it is a debt or liability to the company so this should be treated as a credit entry under Journal entry.

Accrued expenses: these are expenses owed or due for payment by the company which has not been paid, for example, owing of employment wages or salaries at the end of accounting period, the expenses should be debited under journal entry and wages payable should be credited.

Answer 2

The necessary adjusting entries at December 31, 2021, for Wolverine Company are:

1. December 31, 2021

Dr Deferred revenue $2,000

Cr Rent revenue  $2,000

(4,000 x 1/2)

( To record deferred rent revenue earned)

2. December 31, 2021

Dr Insurance expense 6,600

Cr Prepaid insurance  6,600

Insurance expense from July 1 to December 31) = 13,200 x 6/12

= $6,600

( To record insurance expense)  

3. December 31, 2021

Dr Salaries expense 3,000

Cr Salaries payable  3,000

( To record salaries expense)

 

4. December 31, 2021

Dr Interest expense 250

Cr Interest payable  250

(15,000 x 10% x 2/12)

( To record interest expense)

 

5. December 31, 2021

Dr  Supplies expense 4,400

Cr Supplies  4,400

(1,000+3,400)

( To record supplies expense)  

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