Adjusting Entries Data Relating to the Balances of Various Accounts Affected by Affected

question 40

Essay

Adjusting entries
Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries, which caused the changes in the balances, are not given.) You are asked to supply the missing journal entries, which would logically account for the changes in the account balances.
1. Interest receivable at January 1, 2020, was $ 2,000. During 2020, cash received from debtors for interest on outstanding notes receivable was $ 4,700. The 2020 statement of comprehensive income showed Interest Revenue of $ 4,900. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made.
2. Unearned rent at January 1, 2020 was $ 5,300, and at December 31, 2020 was $ 6,000. The records indicate cash receipts from rental sources during 2020 were $ 45,000, all of which were credited to the Unearned Rent Account. You are to prepare the missing adjusting entry.
3. Accumulated Depreciation-Equipment at January 1, 2020, was $ 120,000, and at December 31, 2020, was $ 150,000. During 2020, one piece of equipment was sold. The equipment had an original cost of $ 10,000 and was three-quarters depreciated when sold. You are to prepare the missing adjusting entry.
4. Allowance for doubtful accounts on January 1, 2020, was $ 50,000. The balance in the allowance account on December 31, 2020, after making the annual adjusting entry, was $ 65,000. During 2020 bad debts of $ 30,000 were written off. You are to provide the missing adjusting entry.
5. Prepaid rent at January 1, 2020, was $ 24,000. During 2020 rent payments of $ 160,000 were made and debited to Rent Expense. The 2020 statement of comprehensive income shows Rent Expense of $ 180,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made.
6. Retained earnings at January 1, 2020, was $ 150,000 and at December 31, 2020, it was $ 210,000. During 2020, cash dividends of $ 50,000 were paid, which were correctly debited to Retained Earnings. You are to prepare the missing closing entry to close the Income Summary account.

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Definitions:

Forward Price

The predetermined price agreed upon in a forward contract, at which the asset will be bought or sold at a future date.

European Call

A call option that can only be exercised on the expiration date, not before.

Strike Price

The Strike Price is the fixed price at which the owner of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Derivative Security

A financial instrument whose value is derived from the value of another asset, known as the underlying asset.