Exercise 2-9 Adjusting entries [LO2-5] 1. On October 1, 2013, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2014. 2. On November 1, 2013, the company paid its landlord $6,000 representing rent for the months of November through January. Prepaid rent was debited. 3. On August 1, 2013, collected $12,000 in advance rent from another company that is renting a portion of Microchip’s factory. The $12,000 represents one year’s rent and the entire amount was credited to rent revenue. 4. Depreciation on machinery is $4,500 for the year. 5. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,000. 6. Microchip began the year with $2,000 in its asset account, supplies. During the year, $6,500 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,250 remain on hand. Prepare the necessary adjusting entries at December 31, 2013, for the Microchip Company for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Exercise 2-9 Adjusting entries [LO2-5]

1.	On October 1, 2013, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2014.
2.	On November 1, 2013, the company paid its landlord $6,000 representing rent for the months of November through January. Prepaid rent was debited.
3.	On August 1, 2013, collected $12,000 in advance rent from another company that is renting a portion of Microchip’s factory. The $12,000 represents one year’s rent and the entire amount was credited to rent revenue.
4.	Depreciation on machinery is $4,500 for the year.
5.	Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,000.
6.	Microchip began the year with $2,000 in its asset account, supplies. During the year, $6,500 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,250 remain on hand.

  

Prepare the necessary adjusting entries at December 31, 2013, for the Microchip Company for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

 

Explanation:

Interest receivable ($90,000 × 8% × 3/12) = $1,800

Rent expense ($6,000 × 2/3) = $4,000

Rent revenue ($12,000 × 7/12) = $7,000

Supplies expense ($2,000 + 6,500 − 3,250) = $5,250