| Problem 1 |
| Note: Assume the accounting (fiscal) year ends on December 31st. |
| |
| |
| Situation one |
| A one-year insurance policy was purchased on August 1 for $1,800 and the |
| followng entry was made at that time" |
| Prepaid Insurance 1,800 |
| Cash 1,800 |
| Show the adjusting entry at December 31 in the General Journal Sheet that follows. |
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| Situation two |
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| Supplies were purchased for cash on May 2, 2012, for & 7,500. Show how this purchase |
| would be recorded. Then show the adjusting entry that would be necessary, assuming that |
| $2,500 of the supplies remained at the end of the year. Use the General Journal Sheet |
| that follows. |
| Situation three |
| |
| Assume that a company acquired a building on January 1, 2012, at a cost of $2,000,000. |
| The building had an estimated life of 40 years and an estimated salvage value of $400,000. |
| What adjusting entry is needed on December 31, 2012, to record the depreciation for the |
| entire year 2012? Record your entry on the General Journal that follows. |
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| Situation four |
| |
| On September 1, 2012, Professional Bowler Journal, Inc. received a total of $480,000 as |
| payment in advance for one-year subscriptions to a monthly magazine. A liability account |
| was credited to record this cash receipt. By the end of the year, one third of the magazines |
| paid for in advance had been delivered. Give the entries to record the receipt of the |
| subscription fees and to adjust the accounts at December 31, assuming annual financial |
| statements are prepared at year-end. Use the General Journal that follows. |
| |
| Situation five |
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| A firm borrowed $20,000 on November 1. By December 31, $400 of interest had been |
| incurred. Prepare the adjusting entry required on December 31. Use the General Journal |
| that follows. |
