Recording the adjusting entries
Hokkaido Company”s annual accounting year ends on June 30. It is June 30, 2007, and all of the 2007 entries except the following adjusting entries have been made:
- On March 30, 2007, Hokkaido paid a six month premium for property insurance, $360,000, for coverage stating on that date. Cash was credited and prepaid insurance was debited for this amount.
- At June 30, 2007, wage of $ 101,000 were earned by employees but not yet paid. The employees will be paid on the next payroll date, July 15, 2007.
- On June 1, 2007, Hokkaido collected two months” maintenance revenue of $51,000. At that date Hokkaido debited cash and credited unearned revenue for $51,000.
- Depreciation of $337,000 must be recognized on a services truck that cost $1687, 000 when purchased on July 1, 2006.
- Cash of $472,000 was collected on May 1, 2007, for services rendered evenly over the next year beginning on May 1. Unearned revenue was credited when the cash was received.
- On February 1, 2007, the company borrowed $1,799.000 from local bank and signed a 9 percent note for that amount. The principle and interest are payable on maturity date. January 31, 2008.
- On June 30, 2007, the company estimated that it owed $56,000 in property taxes on land it owned in the first half of 2007. The taxes will be paid when billed in August 2007.
- The company earned service revenue of $225,000 on a special job that was completed June 29, 2007. Collection will be made during July 2007; no entry has been recorded.
Required:
1. Indicate whether each transaction relates to a deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Give the adjustment entry required for each transaction at June 30 2007.