Information for making the year-end adjusting entries for Zimmer Corp appears below.
On March 1, 20×2, Zimmer purchased a three-year liability insurance policy at a cost
of $3,960. Zimmer’s accounting policy is to record prepaid insurance transactions as
expenses and to make appropriate year-end adjusting entries.
On November 30, 20×2, Zimmer renewed the annual lease on a building by paying the
full amount of rent one year in advance on November 30, amounting to
$36,000, which was recorded as prepaid rent.
On May 1, 20×1, Zimmer purchased thirty $1,000 bonds of the local city at a cost of
$30,000. The stated annual interest rate on the bonds is 5 percent, payable quarterly on
May1, August 1, November 1, and February 1. Zimmer correctly recorded the interest
received up to and including November 1.
Zimmer’s depreciable assets have a cost of $85,000 and are being depreciated on a
straight-line basis with an estimated 20-year useful life and estimated residual value of
At the end of 20×2, Zimmer’s revenue account had a credit balance of $3,200,000.
During 20×2, Zimmer received $245,000 in advances; $130,000 of the proceeds was
credited to revenue, and the remainder was credited to deferred revenue. At the end of
20×2, advances of $68,000 were still unearned.
Salary transactions during 20×2 appear as follows:
in January 20×2
payments Feb 1
Salaries of $9,700 are payable at December 31.
Balance, January 1, 20×2
The following information concerning advertising accounts was taken from Zimmer’s
Advertising expense, balance Jan 1, 20×2
Prepaid advertising, balance Jan 1, 20×2
Total disbursements made for advertising in 20×2 were $87,000 and were debited to
advertising expense. The correct amount of advertising expense for 20×2 is
At the beginning of 20×2 the supplies account had a debit balance of $3,700. Purchases
of supplies during 20×2 were debited to the supplies account and totalled $34,900.
Supplies on hand at the end of 20×2 totalled $5,400.
On January 12, 20×3, Zimmer received a bill for $3,000 from HiTech Security, Inc., for night
security services rendered during December 20×2. No entry for the security services has been
Prepare the necessary December 31, 20×2, adjusting entries from the above information.
Sparwood Manufacturing factored $240,000 of their accounts receivable to General Factor
Corp., on a without recourse basis. The receivables are transferred to General Factor, who takes
over the full responsibility of collection. General Factor charged a finance charge of 4% of the
dollar value of the receivables, and withheld 5% of the receivable value.
Prepare the general journal entry to reflect this transaction on Sparwood’s books.
b) Prepare the general journal entry to reflect this transaction on General Factor’s books.