Question

Consider the following transactions for huskies insurance company: equipment costing $42,000 is purchased at the beginning of the year for cash. Depreciation on the equipment is $7,000 per year. On june 30, the company lends its chief financial officer $50,000; principal and interest at 7% are due in one year. On october 1, the company receives $16,000 from a customer for a one-year property insurance policy. Deferred revenue is credited.

Answer 1

The  necessary adjusting entry for Huskies Insurance at its year-end of December 31 is: a. Debit Revenue expense $7000; Credit Accumulated depreciation $7000.

Adjusting entry

huskies insurance company journal entries

a. Debit Revenue expense $7000

Credit Accumulated depreciation $7000

b. Debit Interest receivable $1750

Credit Interest payable $1750

($50,000×7%×6/12)

c. Debit Deferred revenue $4000

Credit Service revenue $4000

($16000×3/12)

Effect on net income

Higher $7000

Lower $1750

Lower $4000

Inconclusion the  necessary adjusting entry for Huskies Insurance at its year-end of December 31 is: a. Debit Revenue expense $7000; Credit Accumulated depreciation $7000.

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