Prepare adjusting entries for the following transactions.

1. Unrecorded interest accrued on savings bonds is $410.

2. Property taxes incurred but not paid or recorded amount to $800.

3. Unearned service revenue of $4,000 was collected in advance. By year end $700 was still unearned.

4. Prepaid insurance had a $750 debit balance prior to adjustment. By year end, 60 percent was still unexpired.

5. Salaries incurred by year end but not yet paid or recorded amounted to $650.

1. Debit Interest receivable $410

Credit Interest income $410

2. Debit Property tax expense $800

Credit Tax liability $800

3. Debit Unearned revenue $3,300

Credit Service revenue $3,300

4. Debit Insurance expense $300

Credit Prepaid Insurance $300

5. Debit Salaries expense $650

Credit Accrued salaries $650

Explanation:

1. Unrecorded interest accrued on savings bond is the amount of interest earned but yet to be paid. The entries to adjust for this are;

Debit Interest receivable $410

Credit Interest income $410

Being entries to recognized interest earned on bond savings.

2. Property taxes incurred but not paid or recorded - This is an expense to the company while the corresponding entry is a liability since it is yet to be paid. The entries to adjust for this are;

Debit Property tax expense $800

Credit Tax liability $800

Being entries to record tax expense incurred on property.

3. Unearned service for which cash has been collected is a liability to the company as there is a present obligation due to the past event of cash collection. when cash was collected, debit cash, credit unearned revenue. When revenue is earned, credit revenue, debit unearned revenue. Going by this, the revenue earned at the end of the year

= $4000 - $700

= $3,300

The entries to adjust for this are;

Debit Unearned revenue $3,300

Credit Service revenue $3,300

Being entries to recognize revenue earned during the year.

4. Prepaid insurance had a $750 debit balance prior to adjustment. By year end, 60 percent was still unexpired. If 60% was unexpired, 40% has expired. This amounts to

= 40% of $750

= $300

The entries to adjust for this are;

Debit Insurance expense $300

Credit Prepaid Insurance $300

Being entries to recognize insurance expense for the period.

5. Salaries incurred by year end but not yet paid or recorded amounted to $650. - When salaries are incurred but unpaid, an expense and a liability should be recorded. The entries to adjust for this are;

Debit Salaries expense $650

Credit Accrued salaries $650

Being entries to recognize insurance expense for the period.

Year end Adjusting Entry

Dr. Cr.

1.

Interest Revenue $410

Rent Revenue $410

2.

Property Tax Expense $800

Property Tax payable $800

3.

Service Revenue $3,300

Unearned Service Revenue $3,300

4.

Interest Revenue $300

Rent Revenue $300

5.

Salaries Expense $650

Salaries Payable $650