Prepare the necessary adjusting entries at December 31, 2013, for the

Microchip Company for each of the following situations. Assume that no

financial statements were prepared during the year and no adjusting
entries were recorded.
1.

2.

3.

4.
5.
6.

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.
On November 1, 2013, the company paid its landlord $6,000
representing rent for the months of November through January. Prepaid
rent was debited.
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 a nominal
account.
Depreciation on machinery is $4,500 for the year.
Vacation pay for the year that had been earned by employees but not
paid to them or recorded is $8,000.
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.
During the course of your examination of the financial statements of the
Hales Corporation for the year ended December 31, 2013, you discover
the following:

7.

8.

9.

An insurance policy covering three years was purchased on January 1,

2013, for $6,000. The entire amount was debited to insurance expense and
no adjusting entry was made for this item.
During 2013, the company received a $1,000 cash advance from a
customer for merchandise to be manufactured and shipped in 2014. The
$1,000 was credited to sales revenue. No entry was made for the cost of
merchandise.
There were no supplies listed in the balance sheet under assets.
However, you discover that supplies costing $750 were on hand at

10.

December 31.
Hales borrowed $20,000 from a local bank on October 1, 2013. Principal
and interest at 12% will be paid on September 30, 2014. No accrual was
made for interest.

Haskins and Jones, Attorneys-at-Law, maintain its books on a cash basis.

During 2013, the company collected $545,000 in fees from its clients and
paid out $412,000 in expenses. You are able to determine the following
information about accounts receivable, prepaid expenses, unearned fee
revenue, and accrued liabilities:

The employees of Xitrex, Inc., are paid each Friday. The company's fiscal
year-end is June 30, which falls on a Wednesday for the current year.
Wages are earned evenly throughout the five-day workweek, and $10,000
will be paid on Friday, July 2.
The information necessary for preparing the 2013 year-end adjusting
entries for Vito's Pizza Parlor appears below. Vito's fiscal year-end is
December 31.
11.

12.

13.

On July 1, 2013, purchased $10,000 of IBM Corporation bonds at face

value. The bonds pay interest twice a year on January 1 and July 1. The
annual interest rate is 12%.
Vito's depreciable equipment has a cost of $30,000, a five-year life, and no
salvage value. The equipment was purchased in 2011. The straight-line
depreciation method is used.
On November 1, 2013, the bar area was leased to Jack Donaldson for one

14.
15.

16.

year. Vito's received $6,000 representing the first six months' rent and
credited unearned rent revenue.
On April 1, 2013, the company paid $2,400 for a two-year fire and liability
insurance policy and debited prepaid insurance.
On October 1, 2013, the company borrowed $20,000 from a local bank and
signed a note. Principal and interest at 12% will be paid on September 30,
2014.
At year-end, there is a $1,800 debit balance in the supplies (asset)
account. Only $700 of supplies remain on hand.