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, 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

Solution:

Journal Entries - Cactus Corporation
Date	Particulars	Debit	Credit
31-Dec	Salaries expense Dr ($4,000*2/5)	$1,600.00
	To Salaries payable		$1,600.00
	(To record salaries expense accrued)
31-Dec	Interest expense Dr ($10,000*6%*4/12)	$200.00
	To Interest payable		$200.00
	(To record interest expense accrued)
31-Dec	Insurance expense Dr ($6,000*10/24)	$2,500.00
	To Prepaid insurance		$2,500.00
	(To record insurance expense)
31-Dec	Unearned revenue Dr ($54,000*7/36)	$10,500.00
	To Subscription revenue		$10,500.00
	(To record subscription revenue)