Question

It is December 31, 2014 and Hortons Co. is about to prepare its year end adjusting...

It is December 31, 2014 and Hortons Co. is about to prepare its year end adjusting journal entries.

REQUIRED: Prepare the December 31, 2014 annual adjusting entries for each of the items listed below. Explanations are not required.  Only adjusting entries are required.

  • On August 1, 2014, the company paid $4,800 for a 2-year insurance policy.
  • On October 1, 2014, the company received $6,000 cash in advance for consulting services. As at December 31, 2014, $4,000 had not yet been earned.
  • Equipment was purchased on January 1, 2012 for $50,000. At that time, the company estimated that the equipment would have a 10 year useful life and a $0 residual value at the end of its life.
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Answer #1

Journal entries on 31st Dec 2014 are as follows:

S.No particulars Debit($) Credit($)
1 Insurance expense (4800/24)*5 1000
To Pre-paid insurance 1000
(being insurance exp charged)
2 Advance from customer 2000
To Consulting services 2000
(being revenue earned)
3 Depreciation 5000
To equipment account 5000
(being depreciation charged. 50000/10)
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