On November 30, the end of the current fiscal year, the following information is available to assist Allerton Company’s accountants in making adjusting entries:
Allerton’s Supplies account shows a beginning balance of . Purchases during the year were . The end-of-year inventory reveals supplies on hand of .
The Prepaid Insurance account shows the following on November 30:
July 1 $4200
October 1 $7272
The beginning balance represents the unexpired portion of a one-year policy purchased in September of the previous year. The July 1 entry represents a new one-year policy, and the October 1 entry represents additional coverage in the form of a three-year policy.
The following table contains the cost and annual depreciation for buildings and equipment, all of which Allerton purchased before the current year:
Account Cost Annual Depreciation
Building $298000 $16000
Equipment $374000 $40000
On October 1, the company completed negotiations with a client and accepted an advance of for services to be performed monthly for a year. The was credited to Unearned Services Revenue.
The company calculated that, as of November 30, it had earned on an contract that would be completed and billed in January.
Among the liabilities of the company is a note payable in the amount of . On November 30, the accrued interest on this note amounted to .
On Saturday, December 2, the company, which is on a six-day workweek, will pay its regular employees their weekly wages of .
On November 29, the company completed negotiations and signed a contract to provide services to a new client at an annual rate of .
1. Prepare adjusting entries for each item listed above.
2. CONCEPT Explain how the conditions for revenue recognition are applied to transactions e and h.