Penny’s Pool Service & Supply, Inc. (PPSS) is completing the accounting process for the year just ended, December 31, 2015. The transactions during 2015 have been journalized and posted. The following data with respect to adjusting entries are available: a. PPSS owed $7,500 wages to the office receptionist and three assistants for working the last 10 days in December. The employees will be paid in January 2016.
b. On October 1, 2015, PPSS received $24,000 from customers who prepaid pool cleaning service for one year beginning on November 1, 2015.
c. The company received a $520 utility bill for December utility usage. It will be paid in January 2016.
d. PPSS borrowed $30,000 from a local bank on May 1, 2015, signing a note with a 10 percent interest rate. The note and interest are due on May 1, 2016.
e. On December 31, 2015, PPSS cleaned and winterized a customer’s pool for $800, but the service was not yet recorded on December 31.
f. On August 1, 2015, PPSS purchased a two-year insurance policy for $4,200, with coverage beginning on that date. The amount was recorded as Prepaid Insurance when paid.
g. On December 31, 2015, PPSS had $3,100 of pool cleaning supplies on hand. During 2015, PPSS purchased supplies costing $23,000 from Pool Corporation, Inc., and had $2,400 of supplies on hand on December 31, 2014.
h. PPSS estimated that depreciation on its buildings and equipment was $8,300 for the year.
i. At December 31, 2015, $110 of interest on investments was earned
Required: Prepare adjusting entries for Penny's Pool Service & Supply, Inc., on December 31, 2015.

Penny's Pool Service & Supply, Inc.

Adjusting Entries:

a. Debit Wages Expense $7,500

Credit Wages Payable $7,500

To record accrued wages.

b. Debit Deferred Revenue $4,000

Credit Service Revenue $4,000

To record earned revenue.

c. Debit Utility Expense $520

Credit Utility Payable $520

To record accrued utility expense.

d. Debit Interest Expense $2,000

Credit Interest Payable $2,000

To record interest expense due.

e. Debit Accounts Receivable $800

Credit Service Revenue $800

To record service revenue earned.

f. Debit Insurance Expense $875

Credit Prepaid Insurance $875

To record expired insurance for the period.

g. Debit Supplies Expense $23,700

Credit Supplies $23,700

To record supplies expense for the period.

h. Debit Depreciation Expense - building and equipment $8,300

Credit Accumulated Depreciation - building and equipment $8,300

To record depreciation expense for the period.

i. Debit Interest Receivable $110

Credit Interest Revenue $110

To record interest revenue earned.

Explanation:

a) Data and Analysis:

a. Wages Expense $7,500 Wages Payable $7,500

b. Deferred Revenue $4,000 Service Revenue $4,000 ($24,000 * 2/12)

c. Utility Expense $520 Utility Payable $520

d. Interest Expense $2,000 Interest Payable $2,000 ($30,000 * 10% * 8/12)

e. Accounts Receivable $800 Service Revenue $800

f. Insurance Expense $875 Prepaid Insurance $875 ($4,200 * 5/24)

g. Supplies Expense $23,700 Supplies $23,700 ($3,100+23,000- 2,400)

h. Depreciation Expense - building and equipment $8,300 Accumulated Depreciation - building and equipment $8,300

i. Interest Receivable $110 Interest Revenue $110

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