Answer:
Explanation:
1. Insurance expense A/c Dr $5,250
To Prepaid Insurance $5,250
(Being prepaid insurance is adjusted)
2. Accrued interest A/c Dr $475
To Interest payable $475
(Being accrued interest is payable)
3. Depreciation expense - equipment A/c Dr $13,800
To Accumulated depreciation - equipment $13,800
The computation of the prepaid insurance and accrued interest is shown below:
Prepaid insurance = Insurance amount × (number of months ÷ total number of months in a year)
= $21,000 × (3 months ÷ 12 months)
= $5,750
The 3 months is computed from October 1 to December 31
Accrued interest = Principal × rate of months × (number of months ÷ total number of months in a year)
= $19,000 × 5% × (6 months ÷ 12 months)
= $475
The 6 months is computed from June 30 to December 31
