IDENTIFICATION AND PREPARATION OF ADJUSTING ENTRIES

IDENTIFICATION AND PREPARATION OF ADJUSTING ENTRIES

Kuepper’s Day Care is a large day-care center in South Orange, New Jersey. The day-care center serves several nearby businesses, as well as a number of individual families. The businesses pay $6,180 per child per year for day-care services for their employees’ children. The businesses pay in advance on a quarterly basis. For individual families, day-care services are provided monthly and billed at the beginning of the next month. The following transactions describe Kuepper’s activities during December 2009:
a. Day-care service in the amount of $12,450 was provided to individual families during December 2009. These families will not be billed until January 2010.
b. At December 1, 2009, the balance in unearned revenue was $43,775. At December 31, 2009, Kuepper determined that $3,090 of this revenue was still unearned.
c. On December 31, the day-care center collected $131,325 from businesses for services to be provided in 2010.
d. On December 31, 2009, the center recorded depreciation of $2,675 on a bus that it uses for field trips.
e. The day-care center had prepaid insurance at December 1, 2009, of $4,200. An examination of the insurance policies indicates that prepaid insurance at December 31, 2009, is $2,200.
f. On December 1, Kuepper borrowed $60,000 by issuing a five-year, $60,000, 9 percent note payable.
g. Interest on the $60,000 note payable is unpaid and unrecorded at December 31.
h. Salaries of $25,320 are owed but unpaid on December 31.
i. The inventory of disposable diapers, on December 1 is $4,400. At December 31, the cost of diapers in inventory is $890.