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Problem 3-2A Preparing adjusting and subsequent journal entries P1 P2 P3 P4Arnez Company’s annual accounting period ends on December 31, 2019. The following information concerns the adjusting entries to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Rent Receivable; Office Supplies; Prepaid Insurance; Building; Accumulated Depreciation—Building; Salaries Payable; Unearned Rent; Rent Earned; Salaries Expense; Office Supplies Expense; Insurance Expense; and Depreciation Expense—Building.The Office Supplies account started the year with a $4,000 balance. During 2019, the company purchased supplies for $13,400, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2019, totaled $2,554.An analysis of the company’s insurance policies provided the following facts. The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.)The company has 15 employees, who earn a total of $1,960 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2019, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year’s Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2020.The company purchased a building on January 1, 2019. It cost $960,000 and is expected to have a $45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $30,500.Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3,000 per month, starting on November 1, 2019. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again.On November 1, the company rented space to another tenant for $2,800 per month. The tenant paid five months’ rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account.RequiredUse the information to prepare adjusting entries as of December 31, 2019.Prepare journal entries to record the first subsequent cash transaction in 2020 for parts c and e.Check (1b) Dr. Insurance Expense, $7,120(1d) Dr. Depreciation Expense, $30,500
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Problem 3-2A Preparing adjusting and subsequent journal entries P1 P2 P3 P4
Arnez Company’s annual accounting period ends on December 31, 2019. The following
information concerns the adjusting entries to be recorded as of that date. Entries can
draw from the following partial chart of accounts: Cash; Rent Receivable; Office
Supplies; Prepaid Insurance; Building; Accumulated Depreciation—Building; Salaries
Payable; Unearned Rent; Rent Earned; Salaries Expense; Office Supplies Expense;
Insurance Expense; and Depreciation Expense—Building.
a. The Office Supplies account started the year with a $4,000 balance. During 2019, the
company purchased supplies for $13,400, which was added to the Office Supplies
account. The inventory of supplies available at December 31, 2019, totaled $2,554.
b. An analysis of the company’s insurance policies provided the following facts. The
total premium for each policy was paid in full (for all months) at the purchase date,
and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting
entries for Prepaid Insurance were properly recorded in all prior years.)
c. The company has 15 employees, who earn a total of $1,960 in salaries each working
day. They are paid each Monday for their work in the five-day workweek ending on
the previous Friday. Assume that December 31, 2019, is a Tuesday, and all 15
employees worked the first two days of that week. Because New Year’s Day is a paid
holiday, they will be paid salaries for five full days on Monday, January 6, 2020.
d. The company purchased a building on January 1, 2019. It cost $960,000 and is
expected to have a $45,000 salvage value at the end of its predicted 30-year life.
Annual depreciation is $30,500.
e. Since the company is not large enough to occupy the entire building it owns, it rented
space to a tenant at $3,000 per month, starting on November 1, 2019. The rent was
paid on time on November 1, and the amount received was credited to the Rent
Earned account. However, the tenant has not paid the December rent. The company
has worked out an agreement with the tenant, who has promised to pay both
December and January rent in full on January 15. The tenant has agreed not to fall
behind again.
f. On November 1, the company rented space to another tenant for $2,800 per month.
The tenant paid five months’ rent in advance on that date. The payment was recorded
with a credit to the Unearned Rent account.
Required
1. Use the information to prepare adjusting entries as of December 31, 2019.
2. Prepare journal entries to record the first subsequent cash transaction in 2020 for
parts c and e.
Check (1b) Dr. Insurance Expense, $7,120
(1d) Dr. Depreciation Expense, $30,500

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