Question

Exercise 2-8 (Algo) Adjusting entries (LO2-6) The following transactions occurred during December 31, 2021, for the Falwell Company. 1. A three-year fire insurance policy was purchased on July 1, 2021, for $10,800. The company debited insurance expense for the entire amount. 2. Depreciation on equipment totaled $11,250 for the year. 3. Employee salaries of $14,500 for the month of December will be paid in early January 2022. 4. On November 1, 2021, the company borrowed $150,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2022. 5. On December 1, 2021, the company received $4,800 in cash from another company that is renting office space in Falwell's building. The payment, representing rent for December, January, and February was credited to deferred rent revenue. 6. On December 1, 2021, the company received $4,800 in cash from another company that is renting office space in Falwell's building. The payment, representing rent for December, January, and February was credited to rent revenue rather than deferred rent revenue for $4,800 on December 1, 2021. Prepare the necessary adjusting entries for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit

Answer 1

1. Prepaid fire insurance A/c Dr (10800*30(months)/36) 9000

To Insurance a/c 9000

2. Depreciation A/c Dr 11250

To Accumulated depreciation/equipment A/c 11250

3. Salary A/c Dr 14500

To Salary payable a/c 14500

4. Interest A/c Dr 3000

To interest payable (150000*2/12)*12% 3000

5. Deffered revenue A/c dr 1600

To Rental income (4800/1/3) 1600

6. Rental income A/c Dr 3200

To Deffered revenue A/c (4800*2/3) 3200