Reference no: EM132893209

Question - The data below concerns adjustments to be made at Tea Leaf Importers.

Adjustments

1. On November 1, 20X1, the firm signed a lease for a warehouse and paid rent of $42,000 in advance for a six-month period.

2. On December 31, 20X1, an inventory of supplies showed that items costing $1,920 were on hand. The balance of the Supplies account was $9,885.

3. A depreciation schedule for the firm's equipment shows that a total of $9,750 should be charged off as depreciation in 20X1.

4. On December 31, 20X1, the firm owed salaries of $12,200 that will not be paid until January 20X2.

5. On December 31, 20X1, the firm owed the employer's social security (6.2 percent) and Medicare (1.45 percent) taxes on all accrued salaries.

6. On September 1, 20X1, the firm received a six-month, 9 percent note for $6,500 from a customer with an overdue balance.

Required -

1. Record the adjusting entries in the general journal as of December 31, 20X1.

2. Record reversing entries in the general journal as of January 1, 20X2.

Analyze: After the adjusting entries have been posted, what is the balance of the Prepaid Rent account on January 1, 20X2?