Question

The following transactions occurred during December 31, 2021, for the Falwell Company. A three-year fire insurance policy was purchased on July 1, 2021, for $14,040. The company debited insurance expense for the entire amount. Depreciation on equipment totaled $13,500 for the year. Employee salaries of $19,500 for the month of December will be paid in early January 2022. On November 1, 2021, the company borrowed $250,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2022. On December 1, 2021, the company received $7,500 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to deferred rent revenue. On December 1, 2021, the company received $7,500 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to rent revenue rather than deferred rent revenue for $7,500 on December 1, 2021. Prepare the necessary adjusting entries for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

1. Insurance expense for 6 months = 12,960 x 6/36

= $2,160

Prepaid insurance on December 31, 2021 = 12,960 - 2,160

= $10,800

2.Interest expense for 2 months = 220,000 x 12% x 2/12

= $4,400

Kindly comment if you need further assistance. Thanks

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