nswer and explain thourougly For the following items, make a journal entry of the original transaction (if applicable) and make the corresponding adjusting entry on December 31. 1 Paid $24,000 for a 1-year fire insurance policy to commence on September 1. the amount of premium was debited to Prepaid Insurance. 2 Borrowed $100,000 by issuing a 1-year note with 7% annual interest to Century Savings Bank on October 1. 3 Paid $160,000 cash to purchase a delivery van of January 1. The van was expected to have a 3-year life and a $10,000 salvage value. Depreciation is computed on a straight-line basis. 4 Received an $18,000 cash advance for a contract to provide services in the future. The contract required a 1-year commitment, starting April 1. 5 Purchased $6,400 of supplies on account. At year’s end, $750 of supplies remained on hand. 6 Invested $90,000 cash in a certificate of deposit that paid 4% annual interest. The certificate was acquired on May 1 and carried a 1-year term to maturity. 7 Paid $78,000 cash in advance on September 1 for a 1-year lease on office space.
ACCRUALS & DEFFERALS
Answer and explain thourougly
For the following items, make a journal
entry of the original transaction (if
applicable) and make the corresponding
adjusting entry on December 31.
1
Paid $24,000 for a 1-year fire insurance policy to
commence on September 1. the amount of
premium was debited to Prepaid Insurance.
2
Borrowed $100,000 by issuing a 1-year note with
7% annual interest to Century Savings Bank on
October 1.
3
Paid $160,000 cash to purchase a delivery van of
January 1. The van was expected to have a 3-year
life and a $10,000 salvage value.
computed on a straight-line basis.
4
Received an $18,000 cash advance for a contract
to provide services in the future. The contract
required a 1-year commitment, starting April 1.
5
Purchased $6,400 of supplies on account. At
year’s end, $750 of supplies remained on hand.
6
Invested $90,000 cash in a certificate of deposit
that paid 4% annual interest. The certificate was
acquired on May 1 and carried a 1-year term to
maturity.
7
Paid $78,000 cash in advance on September 1 for
a 1-year lease on office space.
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