Question

Consider the following transactions for Huskies Insurance Company: Equipment costing $30,000 is purchased at the beginning of the year for cash. Depreciation on the equipment is $5,000 per year. On June 30, the company lends its chief financial officer $30,000; principal and interest at 5% are due in one year. On October 1, the company receives $8,000 from a customer for a one-year property insurance policy. Deferred Revenue is credited. Required:

Answer 1

Answer:

a. Dr Depreciation expense $5,000

Cr Accumulated depreciation $5,000

b. Dr Interest receivable 750

Cr Interest revenue 750

c. Dr Unearned revenue 2,000

Cr Service revenue 2,000

Explanation:

Preparation to record the necessary adjusting entry for Huskies Insurance at its year-end of December 31.

a. Dr Depreciation expense $5,000

Cr Accumulated depreciation $5,000

(Being to adjust for Depreciation of Equipment)

b. Dr Interest receivable 750

Cr Interest revenue 750

(30,000*5%*6/12)

(Being to adjust for accrued interest)

c. Dr Unearned revenue 2,000

Cr Service revenue 2,000

(8,000*3/12)

(Being to adjust for accrued rent revenue)