Chapter 4 (page 204) E4-6 Heald’s Variety Store is completing the accounting process for the year just ended, December 31, 2007. The transactions during 2007 have been journalized and posted. The following data with respect to adjusting entries are available:
a. Office supplies on hand at January 1, 2007, totaled $350. Office supplies purchased and debited to Office Supplies during the year amounted to $800. The year-end count showed $300 of supplies on hand.
b. Wages earned by employees during December 2007, unpaid and unrecorded at December 31, 2007, amounted to $3700. The last payroll was December 28; the next payroll will be January 6, 2008.
c. Three-fourths of the basement of the store is rented for $1500 per month to another merchant. M. Dittman Inc. Dittman sells compatible, but not competitive, merchandise. On November 1, 2007, the store collected six months’ rent in the amount of $9000 in advance from Dittman; it was credited in full to Unearned Rent Revenue when collected.
d. The remaining basement space is rented to Kathy’s Specialty Shop for $820 per month, payable monthly. On December 31, 2007. the rent for November and December 2007 had not been collected or recorded. Collection is expected January 10, 2008.
e. The store used delivery equipment that cost $30000; $5000 was the estimated depreciation for 2007.
f. On July 1, 2007, a two-year insurance premium amounting to $4200 was paid in cash and debited in full to Prepaid Insurance. Coverage began on July 1, 2007.
g. Heald’s operates a repair shop to meet its own needs. The shop also does repairs for M. Dittman. At the end of December 31, 2007, Dittman had not paid $750 for completed repairs. This amount has not yet been recorded as Repair Shop Revenue. Collection is expected during January 2008.
Required:
1. Identify each of these transactions as a deferred revenue, deferred expense, and accrued revenue, or accrued expense
2. Using the process illustrated in the chapter for each situation record the adjusting entry that should be recorded for Heald’s at December 31, 2007.
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