Question

The following information relates to Cactus Corporation at the end of 2019. Cactus has a December 31st fiscal year end. Using this information, prepare the necessary adjusting journal entries at December 31, 2019.

1. Employees are paid every Friday for the five-day week ending on that day. Salaries amount to $4,000 per week. The accounting period ends on a Tuesday.

2. On September 1, 2019, Cactus borrowed $10,000 cash by signing a note payable due in one year at 6% interest.

3. An insurance premium of $6,000 was paid on March 1, 2019, and was charged to Prepaid Insurance. The premium covers a 24-month period beginning on March 1, 2019..

4. On June 1, 2019, cash of $54,000 was received from customers for a 36-month subscription period beginning on that date. The receipt was recorded by a debit to Cash and a credit to Unearned Revenue.

Prepare the adjusting journal entries required as of the end of the first month of practice (January 31, 2018).

Answer 1

Adjusting entry

No	General Journal	Debit	Credit
1	Salaries expense (4000/5*2)	1600
	Salaries payable		1600
2	Interest expense (10000*6%*4/12)	200
	Interest payable		200
3	Insurance expense (6000/24*10)	2500
	Prepaid insurance		2500
4	Unearned revenue (54000/36*7)	10500
	Revenue earned		10500