Reference no: EM132591578

Maja co. follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts. Maja's annual accounting period ends on December 31, 2005.

The following information concerns the adjusting entries to be recorded as of that date:

a. The office supplies account started the year with a$3,000 balance during 2005, the co. purchase supplies for $12,400 which was added to the office supplies account. The inventory of supplies available at December 31, 2005, totaled $2,640.

b. An analysis of the company's insurance policies provided these facts:

Policy Date of Purchase Months of Coverage Cost

A April 01, 2004                 24                $15,840

B April 01, 2005                  36               $13,068

C August 01, 2005              12                 $2,700

D January 15, 2006             10                     $2,000

Total premium for each policy was paid in full at the purchase date and prepaid insurance was debited for the full cost. (note that year ended adjusting entries for prepaid insurance were properly recorded in all prior years).

c. The company has 15 employees, who earn a total of $ 2,100 in salaries each working day. They are paid each Monday for their work in the five day work week ending on the previous Friday. Assume that December 31,2005, is a Tuesday, and all fifteen 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 06, 2006.

d. The company purchased a building on January 1, 2005. It cost $855,000 and is expected to have a $45,000 salvage value at the end of its predicted 30 year life.

e. Since the company is not large enough to occupy the entire building it owns, it rented space to tenant at $ 2,400 per month, starting on November 01, 2005. The rent was paid on time on November 1 st and the amount received was credited to the rent earned account. How ever 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 Ist the company rented space to another tenant for $ 2,175 per month the tenant paid five months rent in advance on that date. The payment was recorded with credit to the unearned rent account.

Required:

Question 1. Use the information to prepare adjusting entries as of December 31, 2005.

Question 2. Prepare Journal entries to record the first subsequent cash transaction in 2006 for part c and e.