Question

1. 1/1/20: Sue and John each invest $69,000 ($138,000 total) into the company and received 5,000 total shares of $7 par common stock.

2. Liability insurance was purchased on 2/1/20.  The 18 month policy cost $2,400 and was paid in full.

3. On 3/1/20, the company purchased a large fishing boat for $19,000 of which had a down payment of $2,000 and the rest of borrowed from First Hawaiian Bank.  The Note Payable’s principle has a 8% annual interest rate due every 6-months while the principle is due at maturity date in 5 years.   The item is depreciated using the straight-line method and has a useful life of 7 years. HINT: Make sure to book ALL regular journal entries for 2020 related to this entry.

4. Shark Bait purchased $13,000 of office supplies and lures from Huge Minnows Company on 3/1/20 on account.

5. Shark Bait provided fishing tours and received $24,000 from customers on 4/10/20.  
6. Shark Bait paid half of what it owes to Huge Minnows Company on 9/1/20.

7. On 9/1/20, Shark Bait received $8,000 cash for a tour that would take place on 2/4/21.

8. On 10/2/20, Shark Bait received $6,000 cash for the sale of some unused lures that were bought on 3/1/20 for $4,000.

9. Operating expenses incurred and paid as of 12/31/20 which consists of:
                 Salaries: $5,600

Utilities: $9,000

Boat Gas:  $1,800

Using the information above PREPARE *ADJUSTED* JOURNAL ENTRIES.

1. The 3/1/20 Notes Payable principle from First Hawaiian Bank is due in 5 years at an annual interest rate of 8%.  Interest must be paid every 6-months.  

2. The boat purchased on 3/1/20 is depreciated using the straight-line method over a useful life of 7 years.  Salvage is zero.

3. Due to the use of office supplies, the Office Supplies and lures only added up to $900 at the end of the 2020 year.

4. Insurance expense was recorde

5. On 12/30/20, 75% of the services were provided early from the customers that paid cash on 9/1/20.

Answer 1

Preparation of Adjusting Entries for the Year Ended 12/31/2020: Journal Entries Date Account Title and Explaination Post. Ref. Debit $ Credit $ a $ 453.33 $ 453.33 Interest Expense ($17000 x 8% x 4months/12months) Interest Payable (To record adjusting entry for accrued interest for 4 months. Note that interest to be paid every 6 months. Loan taken on march 1st so there are 10 months from date of loan to Dec.31, 2020 and it is assumed that interest paid for first 6 months) b $ 2,261.90 Depreciation Expense ($19000/7yrs x 10months/12months) Accumulated Depreciation (To record adjusting entry for Depreciation Expense) $ 2,261.90

с $ 8,100.00 $ 8,100.00 Supplies Expense ($13000-$4000-$900) Office Supplies (To record adjusting entry for Consumption of Supplies during the year) d $ 1,466.67 $ 1,466.67 Insurance Expense ($2400/18months x 11months) Prepaid Insurance (To record adjusting entry for Expired portion of Prepaid Insurance) e $ 6,000.00 $ 6,000.00 Unearned Service Revenue ($8000 x 75%) Service Revenue (To record adjusting entry for earned portion of unearned service revenue)