Question

The following transactions occurred during 2021 for the Beehive Honey Corporation: Feb. 1 Borrowed $25,000 from a bank and signed a note. Principal and interest at 12% will be paid on January 31, 2022. Apr. 1 Paid $6,200 to an insurance company for a two-year fire insurance policy. July 17 Purchased supplies costing $4,100 on account. The company records supplies purchased in an asset account. At the year-end on December 31, 2021, supplies costing $1,900 remained on hand. Nov. 1 A customer borrowed $9,900 and signed a note requiring the customer to pay principal and 10% interest on April 30, 2022.
Required:
1. Record each transaction in general Journal form.
2. Prepare any necessary adjusting entries at the year-end on December 31, 2021. No adjusting entries were recorded during the year for any item

Answer 1

Answer: Please see answers in explanation column

Explanation:

1.The Journal entries are as follows

1. To record amount borrowed

Date account title        Debit                            Credit

Feb 1   Cash                           $25,000

         Notes payable                                                $25,000

 

2. To record prepaid insurance

Apr 1 Prepaid insurance         $6,200

                  Cash                                                             $6,200

 

3. To record supplies purchased

July 17 Supplies                         $4,100

         Account payable                                                       $4,100  

4 To record money lent to customer

Nov 1 Notes receivable                   $9,900

             Cash                                                                         $9,900

2)Adjusting entry    are as follows

1.To record accrued interest

Date account title               Debit                         Credit

Dec 31 Interest expense       $2,750

            Interest payable                                                 $2,750

Calculation

Interest expense = principal x rate x period

$25,000 x 12% x 11/12 = $2,750

 

2)To record insurance expense

Date account title               Debit                         Credit

Dec 31 Insurance expense $2,325

Prepaid insurance                                                                  $2,325

Calculation

Insurance expense = amount on insurance x period

$6,200 x 9/24=$2,325

3.To record supplies expense

Dec 31 Supplies expense                 $2,200

                       Supplies                                                       $2,200

Calculation

Amount purchased - amount remaining on   hand

=$4,100 -$1,900=$2,200

4. To record interest  received from customer

Dec 31 Interest receivable        $165

             

                Interest revenue                                                        $165

Calculation

Interest receivable  = principal x rate x period(Nov-DEC )

$9,900 x 10% x 2/12 = $165