Question

The following transactions occurred during 2018 for the Beehive Honey Corporation: Feb. 1 Borrowed $21,000 from a bank and signed a note. Principal and interest at 10% will be paid on January 31, 2019. Apr. 1 Paid $5,400 to an insurance company for a two-year fire insurance policy. July 17 Purchased supplies costing $3,700 on account. The company records supplies purchased in an asset account. At the year-end on December 31, 2018, supplies costing supplies costing $1,700 remained on hand. Nov. 1 A customer borrowed $8,700 and signed a note requiring the customer to pay principal and 8% interest on April 30, 2019. Required: 1. Record each transaction in general journal form. 2. Prepare any necessary adjusting entries at the year-end on December 31, 2018. No adjusting entries were recorded during the year for any item.

Answer 1

1.

Journal

Date	Account title	Debit	Credit
Feb. 1	Cash	21,000
	Note payable		21,000
	(To record note payable)
April 1	Prepaid insurance	5,400
	Cash		5,400
	(To record Prepaid insurance)
July 17	Supplies	3,700
	Accounts payable		3,700
	(To record purchase of supplies on account)
Nov. 1	Note receivable	8,700
	Cash		8,700
	(To record Note receivable)

2.

Journal

Date	Account title	Debit	Credit
Dec. 31	Interest expense	1,925
	Interest payable		1,925
	(To record interest expense on note payable)
Dec. 31	Insurance expense	2,025
	Prepaid insurance		2,025
	(To record insurance expense)
Dec. 31	Supplies expense	2,000
	Supplies		2,000
	(To record supplies expense)
Dec. 31	Interest receivable	116
	Interest revenue		116
	(To record interest revenue)

Interest expense on note payable = 21,000 x 10% x 11/12

= $1,925

Insurance expense for the year 2018 = 5,400 x 9/24

= $2,025

Supplies expense = Supplies purchased - Ending supplies

= 3,700 - 1,700

= $2,000

Interest revenue on December 31, 2018 = 8,700 x 8% x 2/12

= $116

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