Liabilities & Shareholders’ Equity

Accounting
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Author’s Note:

Part 2 – ACCOUNTING CYCLE
ADJUSTING ENTRIES AND POSTING TO T-ACCOUNTS (10 points)
If needed, prepare the required adjusting journal entry for each situation as of December 31,
2019 and post them to T- accounts provided. (See the last page for the unadjusted account
balances shown in T-accounts.)
Example.
Dec. 31 Account Name Debit
2019 Account Name Credit
(a) Suppose Dana’s had received a $1,800 shipment of supplies in September 2019. When
counting the supplies on December 31, 2019, Dana’s found only $800 worth of supplies on hand.
(2 points)
Debit and credit the accounts affected.
Dec. 31 Supplies expenses $1,000
2019 Supplies $1,000
(b) Suppose Dana’s had paid $12,000 for six months’ rent on November 1, 2019. (2 points)
Debit and credit the accounts affected.
Dec. 31 Rent expenses $4,000
2019 Prepaid rent $4,000

(c) Suppose Dana’s had paid $6,000 for one year’s insurance on June 1, 2019. (2 points)
Debit and credit the accounts affected.
Dec. 31 Insurance expense $3,500
2019 Prepaid insurance $3,500
(d) The company had acquired Property, Plant & Equipment costing $40,000 on January 1, 2019.
Suppose that the depreciation on this Equipment was calculated to be $2,000 for 2019. (2 points)
Debit and credit the accounts affected.
Dec. 31 Depreciation expense-Plant & Equipment $2,000
2019 Accumulated depreciation-Plant & Equipment $2,000
(e) On December 1, 2019, the company had sold $500 in gift certificates for decorating services
to a customer. On December 31, 2019, the accountant received an envelope containing $400
worth of redeemed gift certificates, not yet recorded in the company’s books. (2 points)
Debit and credit the accounts affected.
Dec. 31 Decorating revenue $400
2019 Unearned revenue $400
(f) On June 30, 2019, the company invested $20,000 in a certificate of deposit that will yield
(generate) 12% interest at the end of one year. (2 points)
Debit and credit the accounts affected.
Dec. 31 Investment income $2,400
2019 Interest receivable $2,400