What would be the correct closing entries for the following:
- The notes payable balance relates to a bank loan obtained in2018 that is payable in full on august 31,2023. the loan agreementspecifies that Clarke pay interest annually on august 31 at a rateof 7.05%. Clarke's bookkeeper made the proper entry for the firstinterest payment.
- On September 20,2019, Clarke paid $53,952 for ads to run evenlyover a 10-month period, starting October 1,2019.
- In November 2019, Clarke received $129,320 from a client as adeposit on a major new engagement. As of December 31, 2019, Clarkehad completed $41,715 of these services.
- Clarke operates 5 days a week, Mondays through Fridays.Employees are paid each Monday, for hours worked through theprevious Friday. On Monday, December 30, 2019, the last pay day in2019, Clarke paid its employees for hours worked during the week ofDecember 23-27. The employees then worked their regular schedulethrough the end of the year. Clarke’s payroll averages $10,325 perday.
- On June 1, 2019, Clarke signed a lease to rent additionalbuilding space. On that date, Clarke prepaid the first 18 months ofrent totaling $59,202. The prepayment covers the period June 2019through November 2020. Note – Contrary to the company’s normalpractice, Clarke’s bookkeeper recorded the prepayment into the RentExpense account. Give the adjusting entry needed when a companyuses the expense approach to record a payment in advance.
- Clarke performed $118,731 of engineering services for severalclients in December 2019 that it has not yet billed, recorded orcollected.
- Clarke’s Office Supplies account at the beginning of 2019 had abalance of $14,320. In August, the company purchased an additional$25,095 of supplies. A physical count at year-end 2019 shows that$29,170 of the supplies remain on hand.
- Clarke purchased its buildings in 2011 and its equipment in2016. Clarke depreciates its fixed assets according to thestraight-line method. For the buildings, it uses estimates of 40years for the useful life and $180,000 for the salvage value. Forthe equipment, it uses estimates of 8 years for the useful life and$60,000 for the salvage value.
- Clarke estimates that 8.77% of the 2019 year-end accountsreceivable balance will not be collected.
- The company’s income tax rate for the year is 25%.(Hint – The income tax rate is applied to the company’s incomeafter all revenues and expenses have been considered except for theincome tax charge.)
These are the adjusting entries:
| Adjusting Journal Entry for December 19 | | |
| 1)Interest Expense | $5,576 | |
| Interest Payable | | $5,576 |
| 2)Advertising | 16,186 | |
| Prepiad Advertising | | 16,186 |
| 3)Unearned Revenue | 41,715 | |
| Service Revenue | | 41,715 |
| 4)Salaries and Wages Expense | 20,650 | |
| Salaries and WagesPayable | | 20,650 |
| 5)Prepaid Rent | 36,179 | |
| Rent Expense | | 36,179 |
| 6)Unearned Revenue | 118,731 | |
| Accounts Recievable | | 118,731 |
| 7)Supplies Expense | 10,245 | |
| Supplies | | 10,245 |
| 8)Depreciation-Building | 18,468 | |
| Depreciation-Equipment | 83,797 | |
| AccumlatedDepreciation-Building | | 18,468 |
| AccumlatedDepreciation-Equipment | | 83,797 |
| 9) BadDebt Expense | 44,496 | |
| Allowance for Doubtful Accounts | | 44,496 |
| 10)Tax | 225,635 | |
| Provision of Tax | | 225,635 |
