Question

Problem 3-4A Record adjusting entries (LO3-3) 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. 1. A three-year fire insurance policy was purchased on July 1, 2021, for $18,000. The company debited Prepaid Insurance for the entire amount. eBook 2. Employee salaries of $25,000 for the month of December will be paid in early January 4. Supplies at the beginning of the year totaled $2.000. During 2021, additional supplies of $18,000 were purchased, and the entire 5. Buzzard paid a local radio station $12,000 for four months of advertising on December 1, 2021. The advertising will appear evenly 6. Buzzard borrowed $36,000 on March 1, 2021. The principal is due to be collected in five years. Interest is receivable each March 1 at ferences 3. On November 1, 2021, the company received $6,000 in cash from a customer requesting a custom design for six identical bikes $1,000 each). Deferred Revenue was credited for the entire amount By the end of the year, four of the bikes have been completed. amount was debited to Supplies. Supplies remaining at the end of the year total $4,000. over the four-month period. The company debited Prepaid Advertising for the entire amount. an annual rate of 10%. 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

Answer 1

Journal

Date	Account title	Debit	Credit
1	Insurance expense	3,000
	Prepaid insurance expense		3,000
2	Salaries expense	25,000
	Salaries payable		25,000
3	Deferred revenue	4,000
	Sales revenue		4,000
4	Supplies expense	16,000
	Supplies		16,000
5	Advertising expense	3,000
	Prepaid advertising expense		3,000
6	Interest expense	3,000
	Interest payable		3,000

Interest payable on borrowings = 36,000 x 10% x 10/12

= $3,000

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