The following transactions occurred during December 31, 2018, for the Falwell Co

Question

The following transactions occurred during December 31, 2018, for the Falwell Company. 1. A three-year fire insurance policy was purchased on July 1, 2018, for $14,760. The company debited insurance expense for the entire amount. 2. Depreciation on equipment totaled $14,000 for the year. 3. Employee salaries of $20,500 for the month of December will be paid in early January 2019. 4. On November 1, 2018, the company borrowed $270,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2019. 5. On December 1, 2018, the company received $4,700 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December and January, was credited to deferred rent revenue. 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.

Explanation / Answer

Date Accounts Title Dr Cr 1 Insurance expenses $2,460 Prepaid Insurance $2,460 (14760/3*6/12) 2 Depreciation expenses $14,000 Accumulated Depreciation-Equipment $14,000 3 Salaries expenses $20,500 Salaries Payable $20,500 (being adjusting entry for salaries recorded) 4 Interest expenses 5400 Interest payable $5,400 (270000*12%*2/12) (being interest expenses accured recorded) 5 Deferred Rent revenue $2,350 Rent Revenue (4700/2) $2,350 (being rent earned recorded) If any doubt please comment. If satisfied you can rate

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