Response to the following problem:
Adjusting Entries Sarah Company's trial balance on December 31, 2013 (the end of its annual accounting period), included the following account balances before adjustments:
Notes Receivable $10,000
Insurance 3,000
Delivery Equipment 14,000
Building 60,000
Unearned Rent $4,320
Notes Payable 7,200
Reviewing the company's recorded transactions and accounting records for 2013, you find the following data pertaining to the December 31, 2013 adjustments:
Required:
Prepare the adjusting entries that are necessary to bring Sarah's accounts up to date on December 31, 2013. Each journal entry explanation should summarize your calculations.
1. On July 2, 2013, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected
2. On August 2, 2013, the company had paid $3,000 for a 2-year insurance policy.
3. The building was acquired in 1998 and is being depreciated using the straight-line method over a 25-year lief. It has an estimated residual value of $8,000.
4. The delivery equipment was purchased on April 2, 2013. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000.
5. On September 1, 2013, the company had received 2 years' rent in advance ($4320) for a portion of a building it is renting to Victoria Company.
6. On December 1, 2013, the company had issued a $7,200, 30month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid.
7. On January 2, 2013, the company purchased $1,000 of office supplies. A physical count on December 31, 2013, revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year.