Question

Buzzard Bicycle specializes in custom painting and design of bicycles. December 31 is the company's fiscal year-end. Information necessary to prepare the year-end adjusting entries appears below. 5 points Skipood 1. A three-year fire insurance policy was purchased on July 1, 2021, for $22,500. The company debited Prepaid Insurance for the entire amount. 2. Employee salaries of $28,000 for the month of December will be paid in early January 3. On November 1, 2021, the company received $10,500 in cash from a customer requesting a custom design for six identical bikes ($1,750 each). Deferred Revenue was credited for the entire amount. By the end of the year, four of the bikes have been completed. 4. Supplies at the beginning of the year totaled $5,000. During 2021, additional supplies of $21,000 were purchased, and the entire amount was debited to Supplies. Supplies remaining at the end of the year total $7.000. 5. Buzzard paid a local radio station $15,000 for four months of advertising on December 1 2021. The advertising will appear evenly over the four month period. The company debited Prepaid Advertising for the entire amount 6. Buzzard borrowed $40,500 on March 1, 2021. The principal is due to be collected in five years. Interest is receivable each March 1 at an annual rate of 10%. Pret References Required: Record the necessary adjusting entries on December 31, 2021. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 5 6

Answer 1

31-Dec	Insurance expense a/c Dr	7500
	To Prepaid Insurance		7500
	(Being isurace exp of first year expensified)
31-Dec	Salary a/c Dr	28000
	To outstanding salary exp		28000
	(Being salary exp accrued)
31-Dec	Deferred revenue a/c Dr	7000
	To revenue a/c		7000
	(Being revenue recorded against 4 completed bike)
31-Dec	Closing stock A/c Dr	7000
	To supplies a/c		7000
	(Being closing stock of 7000 transfer from supplies)
31-Dec	Advertisment exp A/c Dr	3750
	To Prepaid advertisement		3750
	(Being amount expensified for Dec period)
31-Dec	Interest exp A/c Dr	3375
	To Cash a/c		3375
	(Being interest exp @10% on 40,500 for 10 months)