A company has a fiscal year-end of december 31: (1) on october 1, $12,000 was paid for a one-year fire insurance policy; (2) on june 30 the company lent its chief financial officer $10,000; principal and interest at 6% are due in one year; and (3) equipment costing $60,000 was purchased at the beginning of the year for cash. depreciation on the equipment is $12,000 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.)

Question

Dayanara Torres

Business

23 November, 04:54

A company has a fiscal year-end of december 31: (1) on october 1, $12,000 was paid for a one-year fire insurance policy; (2) on june 30 the company lent its chief financial officer $10,000; principal and interest at 6% are due in one year; and (3) equipment costing $60,000 was purchased at the beginning of the year for cash. depreciation on the equipment is $12,000 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.)

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Trinity Lyons · Answer 1

Debit Insurance expense 3,000

credit Prepaid insurance 3,000

Insurance expense = $12,000 * 3/12 = $3,000

debit Interest receivable 300

credit Interest revenue 300

Interest receivable = $10,000 * 6% * 6/12 = $300

debit Depreciation expense 12,000

credit Accumulated depreciation 12,000