Financial Accounting I – IV
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2015 Fall Q. No. 16
Prepare the December 31 adjusting entries from the following information. 
a. The company’s inventory of office supplies on December 1 was 2,850. The company bought supplies costing Rs. 4,710 in December. The inventory of office supplies on December 31 totaled Rs. 1,930.
b. The company had not paid December salary of Rs.4,900 at the month-end.
c. On 9 December, a customer paid an advance of Rs.9,300 for future services. The company provided services worth Rs. 7,100 to the customer in December.
d. The company made a three-year bank deposit ofRs. 20,000 on December 1. The deposit carried interest at 12 percent per annum.
e. The company bought equipment costing Rs. 13,000on November 1. The equipment had an estimated useful life of 10 years at the end of which it has salvage value Rs. 1,000.
Solution to this question:
On 31st December
Supplies expenses a/c Dr. Rs. 5,630
Office supplies a/c Rs. 5,630
(To record the supplies expenses for the month)
Salary expenses a/c Dr. Rs. 4,900
Salary payable a/c Rs. 4,900
(To record the payment due of salary for the month)
Unearned service revenue a/c Dr. Rs. 2,200
Service revenue a/c Rs. 2,200
(To record the remaining unearned service revenue for the month)
Interest receivable a/c Dr. Rs. 200
Interest revenue a/c Rs. 200
(To record the interest revenue earned for the month but not yet received)
Depreciation expenses – Equipment a/c Dr. Rs. 200
Accumulated depreciation a/c Rs. 200
(To record the depreciation expenses on equipment for two-month)
a. Calculation of supplies expenses
|Beginning amount of supplies|
Add: Purchase during the month
Less: Supplies on hand at the end of the month
|Supplies expenses||Rs. 5,630|
|Total unearned service revenue|
Less: Earned during the month
|Remaining unearned service revenue||Rs. 2,200|
d. Interest amount = Rs. 20,000 × 0.12 × 1 / 12 = Rs. 200
e. Calculation of depreciation on equipment
yearly depreciation = original cost – salvage value / estimated life
= 13,000 – 1,000 / 10 = Rs. 1,200
Depreciation for two-month = Rs 1,200 × 2 / 12 = Rs. 200