A review of the ledger of Greenberg Company at Decembe
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A review of the ledger of Greenberg Company at December 31, 2014, produces the following important data for the prepar
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A review of the ledger of Greenberg Company at December 31, 2014, produces the following important data for the preparation of annual adjusting entries: 1. Prepaid Advertising, December 31, 2014, unadjusted balance, $15,600. This balance consists of payments on two advertising contracts for monthly advertising in two trade magazines. The terms of the contracts are as follows: 2. Vehicles, December 31, 2014, unadjusted balance, $70,000. The company owns two vehicles used for delivery purposes. The first, purchased for $30,000 on January 2, 2012, has an estimated five-year useful life. The second, purchased for $40,000 on June 1, 2014, has an estimated six-year useful life. 3. Prepaid Insurance, December 31, 2014, unadjusted balance, $17,250. Th is balance consists of two insurance policies: a two-year policy effective July 1, 2013, to June 30, 2015, that cost $12,360 and a one-year policy effective May 1, 2014, to April 30, 2015, that cost $7,980. (Hint: Appropriate adjusting entries were made at December 31, 2013.) 4. Notes Payable, December 31, 2014, unadjusted balance, $85,000. This consists of an eight-month, 6.5% note, dated August 1. Interest is payable at maturity. 5. Salaries Payable, December 31, 2014, unadjusted balance, $0. There are nine salaried employees. Salaries are paid every Saturday for a six-day workweek (Monday-Saturday). Six employees receive a salary of $750 per week, and three employees earn $600 per week. December 31, 2014, is a Wednesday. 6. Unearned Revenue, December 31, 2014, unadjusted balance, $270,000. Greenberg began renting office space to tenants in its new building on November 1. At December 31, Greenberg had the following rental contracts that were paid in full for the entire term of the lease: Instructions (a) Prepare the adjusting entries at December 31, 2014. Show all your calculations. (b) For item 2, calculate the accumulated depreciation and carrying amount of each vehicle on December 31, 2014. TAKING IT FURTHER What is the purpose of recording depreciation? Why is land not depreciated?
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