The Franklin Retail Company entered into the following transacti


Question Description:

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The Franklin Retail Company entered into the following transactions during 2007. [The transactions were properly recorded in real (balance sheet) accounts unless otherwise indicated.] Date Transaction_______________________________ Jan. 25 Purchased $480 of office supplies. Feb. 1 Rented a warehouse from Tropple Company, paying one year’s rent of $3,600 in advance. Recorded the $3,600 payment as rent expense. Mar. 1 Borrowed $10,000 from the bank, signing a one-year note at an annual interest rate of 12%. The interest was collected in advance by the bank. The company recorded the transaction as a debit to Cash $8,800, debit to Interest Expense $1,200, and credit to Notes Payable $10,000. May 1 Purchased office equipment for $15,000, paying $3,000 down and signing a two-year, 12% (annual rate) note payable for the balance. The office equipment is expected to have a useful life of 10 years and a residual value of $1,500. Straight-line depreciation is appropriate. May 31 Purchased a three-year comprehensive insurance policy for $720. Aug. 1Sold land for $9,000. The purchaser made a $2,000 down payment and signed a one-year, 10% note for the balance. The interest and principal will be collected on the maturity date. Oct. 1 Rented a portion of the retail floor space to a florist for $120 per month, collecting eight months’ rent in advance. Recorded the $960 receipt as rent revenue. Nov.13 Issued checks to sales personnel totaling $900. The checks are advances for expected travel costs during the remainder of the year. On December 31, 2007 the following additional information is available: 1. Property taxes for 2007 are due to be paid by April 1, 2008. The company has not paid or recorded its $2,300 property taxes for 2007. 2. The $302 December utility bill has not been recorded or paid. 3. Salaries accrued but not paid total $927. 4. Travel cost reports indicate that $787 of travel advances have been used to pay travel expenses. 5. The Office Supplies account had a balance of $129 on January 1, 2007. A physical count on December 31, 2007 showed $174 of office supplies on hand. 6. On January 1, 2007 the Buildings account and the Store Equipment account had balances of $100,000 and $65,000, respectively. The buildings are expected to have an $8,000 residual value, while the store equipment is expected to have a $2,000 residual value at the end of their respective lives. They are being depreciated using the straight-line method over 20- and 10-year lives, respectively. 7. The income tax rate is 30% on current income and is payable in the first quarter of 2008. The pretax income of the company before adjustments is $27,749. Required On the basis of the preceding information, prepare journal entries to adjust the company’s books as of December 31, 2007. Each entry explanation should include supporting computations. (Round to the nearest dollar.)

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