Exercise 3-5

Drew Carey Company has the following balances in selected accounts on December 31, 2010.

Accounts Receivable $ -0-

Accumulated Depreciation—Equipment -0-

Equipment 7,000

Interest Payable -0-

Notes Payable 10,000

Prepaid Insurance 2,100

Salaries Payable -0-

Supplies 2,450

Unearned Consulting Revenue 40,000

All the accounts have normal balances. The information below has been gathered at December 31, 2010.

1. Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2010.

2. A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand.

3. Depreciation on the equipment for 2010 is $1,000.

4. Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2010.

5. On December 1, 2010, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2011.

6. Drew Carey performed consulting services for a client in December 2010. The client will be billed $4,200.

7. Drew Carey Company pays its employees total salaries of $9,000 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2010.

Instructions

Prepare adjusting entries for the seven items described above

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