QUESTION 2 (26 marks) Prepare adjusting entries for the year ended December 31, for each...
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Accounting
QUESTION 2 (26 marks) Prepare adjusting entries for the year ended December 31, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities. (i) The Prepaid Rent account has a debit balance of $8,000 before adjustment, representing a prepayment for four months' rent made on December 1 of the current year. (ii) One-third of the service related to $18,000 of cash received in advance was performed during this period. (iii) Unpaid accrued salaries at December 31 amounts to $15,000. (iv) Service was completed for a client on December 31 in the amount of $21,000, but was not previously billed or recorded. (V) Depreciation of the firm's office equipment is based on an estimated life of 4 years. The office equipment was purchased two years ago for $108,000. Required: (a) Prepare the journal entries to record the above transactions. (Explanation of Journal Entry is not required) (20 marks) (b) Compute the increase or decrease in profit at the end of December as a result of the above adjusted entries. (Show workings) (6 marks)
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