Answer:
adjusting entries:
a. An insurance policy covering three years was purchased on January 1, 2021, for $6,600. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item.
Dr Prepaid insurance 4,000
Cr Insurance expense 4,000
b. During 2021, the company received a $850 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The $850 was credited to sales revenue. No entry was recorded for the cost of merchandise.
Dr Sales revenue 850
Cr Unearned revenue 850
c. There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $900 were on hand at December 31.
Dr Supplies 900
Cr Supplies expense 900
d. Hales borrowed $25,000 from a local bank on October 1, 2021. Principal and interest at 12% will be paid on September 30, 2022. No accrual was recorded for interest.
Dr Interest expense 750
Cr Interest payable 750
e. Net income reported in the 2021 income statement is $40,000 before reflecting any of the above items.
net income after adjustments = $40,000 + $4,000 - $850 + $900 - $750 = $43,300
