Question

Which of the following transactions will require an adjusting entry for the company listed? A PepsiCo paid $5,000 to rent a forklift truck for one of its plants for 3 months, starting on 11/1/2021. PepsiCo rented the truck for the entire 3 -month period. B Penguin Books sold a set of 100 copies of the newest bestseller by Stephen King to Barnes and Noble on 12/26/2021, allowing B\&N to pay by 1/10/2022. B\&N paid for the books on 1/9/2022. C GM received maintenance services on 12/23/2021 for its fleet of corporate executive cars and paid for this service on 1/9/2022. D On 12/20/2021 Tesla received $20,000 as a deposit by a customer towards purchasing a new Model Z vehicle upon its completion. Telsa finished producing the vehicle on 1/30/2022 and shipped it to the customer and collected the remaining $40,000 of the sales price on this date (1/30/2022). Z Co. purchases a 3-year insurance policy on its building. The insurance policy begins on 9/1/2021 and requires Z to make payments every 3 months of $2,400 with the first payment due on 9/1/2021 Prepare the entries that Z will make in the 2021 fiscal year only for this transaction. Make sure that your entries include dates, account names, and amounts. If any entries are adjusting entries, label them as adjusting entries. On 10/15/2021, A Co. enters into a contract to provide lunch service to the next 6 of B Co.'s monthly executive meetings on the 25 th of each month, starting on 10/25/2021 and ending on 3/25/2022. B Co. will make 2 payments of $1,200 each under the contract: one on 12/26/2021 and one on 3/26/2022. Prepare the entries that A will make in the 2021 fiscal year only for this transaction. Make sure your entries include dates, account names, and amounts. If any entries are adjusting entries, label them as adjusting entries.

Answer 1

Answer: The transaction that will require an adjusting entry for the company listed is option A, PepsiCo paying $5,000 to rent a forklift truck for one of its plants for 3 months, starting on 11/1/2021.

This transaction will require an adjusting entry because, at the end of the accounting period (December 31, 2021), the company will have used two months of the forklift rental but only recorded one month of expense ($1,667). Therefore, an adjusting entry is needed to record the additional $3,334 of expenses for the remaining two months of the rental period.

The adjusting entry for this transaction would be:

Date Account Titles Debit Credit

12/31/2021 Rent expense $3,334

Accrued rent payable $3,334

Option D, where Tesla received a deposit for a vehicle and later collected the remaining sales price upon completion, will not require an adjusting entry as it is a standard sales transaction. The other transactions listed do not involve timing differences that would require adjusting entries.

For the additional transactions provided:

Z Co. purchases a 3-year insurance policy on its building. The insurance policy begins on 9/1/2021 and requires Z to make payments every 3 months of $2,400 with the first payment due on 9/1/2021.

Entries for 2021:

9/1/2021 Prepaid insurance $2,400

Cash $2,400

(To record payment for 1st quarter of 3-year insurance policy)

12/31/2021 Insurance expense $4,800

Prepaid insurance $4,800

(To record insurance expense for 2 quarters of the 3-year insurance policy)

On 10/15/2021, A Co. enters into a contract to provide lunch service to the next 6 of B Co.'s monthly executive meetings on the 25th of each month, starting on 10/25/2021 and ending on 3/25/2022. B Co. will make 2 payments of $1,200 each under the contract: one on 12/26/2021 and one on 3/26/2022.

Entries for 2021:

10/15/2021 Accounts receivable $1,200

Service revenue $1,200

(To record agreement to provide lunch service)

12/31/2021 Accounts receivable $1,200

Service revenue $1,200

(To record revenue earned for 2 lunch services provided)

Accounts receivable will be credited and cash will be debited on receipt of payment.

Hence, The correct option is A

Answer 2

i believe the answer is A