Question

0.83 points eBookPrintReferences Check my work Check My Work button is now enabledItem 2Item 2 0.83 points A company has a fiscal year-end of December 31: (1) on October 1, $29,000 was paid for a one-year fire insurance policy; (2) on June 30 the company advanced its chief financial officer $27,000; principal and interest at 5% on the note are due in one year; and (3) equipment costing $77,000 was purchased at the beginning of the year for cash. Depreciation on the equipment is $15,400 per year. Prepare the necessary adjusting entries at December 31 for each of the above items. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

1. Dr Insurance expense7,250

Cr Prepaid insurance7,250

2. Dr Interest receivable 675

Cr Interest revenue 675

3. Dr Depreciation expense15,400

Cr Accumulated depreciation15,400

Explanation:

Preparation of Journal entry

1. Based on the information given we were told that the amount of $29,000 was been paid for a one year fire insurance policy which means that the Journal entry will be :

Dr Insurance expense7,250

Cr Prepaid insurance7,250

($29,000 × 3/12 = $7,250)

2. Based on the information given we were told the company gave advanced to its chief financial officer for the amount of $27,000 which as well include principal and interest at 5% which means that the Journal entry will be :

Dr Interest receivable 675

Cr Interest revenue 675

($27,000 × 5% × 6/12 = $675)

3. Based on the information given we were told that the Depreciation on the equipment is the amount of $15,400 per year which means that the Journal entry will be :

Dr Depreciation expense15,400

Cr Accumulated depreciation15,400