Sample Problem Chapter 5

 Calculating adjustments. Determine the necessary end-of-June adjustments for Carlson Company. 1.On June 1, 2007, Carlson Company, a new firm, paid $9,000 rent in advance for a six-month period. The $9,000 was debited to the Prepaid Rent account. 2.On June 1, 2007, the firm bought supplies for $2,375. The $2,375 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing $900 were on hand. 3.On June 1, 2007, the firm bought equipment costing $27,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.

1. On June 1, 2007, Carlson Company, a new firm, paid $9,000 rent in advance for a six month period. The $9,000 was debited to the Prepaid Rent account. Determine the end-of-June adjustment Debit Rent Expense $1,500 Debit Rent Expense $1,500 Credit Prepaid Rent $1,500 Credit Prepaid Rent $1,500 $9,000/6 months = $1,500 month rent expense

2. On June 1, 2007, the firm bought supplies for $2,375. The $2,375 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing $900 were on hand. Determine the end of June adjustment. Debit Supplies Expense $1,475 Debit Supplies Expense $1,475 Credit Supplies $1,475 Credit Supplies $1,475 $2,375 - $900 = $1,475

3. On June 1, 2007, the firm bought equipment costing $27,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight line method of depreciation. Determine the end-of-June adjustment. Debit Depreciation Expense $225 Debit Depreciation Expense $225 Credit Accumulated Depreciation $225 Credit Accumulated Depreciation $225 [$27,000 – 0(no salvage value)]/10 years = $2,700/year. $2,700/12 months = $225 month