Question

The following transactions occurred during December 31, 2021, for the Falwell Company.

1. A three-year fire insurance policy was purchased on July 1, 2021, for $15,480. The company debited insurance expense for the entire amount.
2. Depreciation on equipment totaled $14,500 for the year.
3. Employee salaries of $21,500 for the month of December will be paid in early January 2022.
4. On November 1, 2021, the company borrowed $290,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2022.
5. On December 1, 2021, the company received $8,700 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to deferred rent revenue.
6. On December 1, 2021, the company received $8,700 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to rent revenue rather than deferred rent revenue for $8,700 on December 1, 2021.

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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Answer 1

Adjusting entries

No	general Journal	Debit	Credit
1	Insurance expense (15480/36*6)	2580
	Prepaid insurance		2580
2	Depreciation expense	14500
	Accumulated depreciation-equipment		14500
3	Salaries expense	21500
	Salaries payable		21500
4	Interest expense (290000*12%*2/12)	5800
	Interest payable		5800
5	Deferred rent revenue (8700/3)	2900
	Rent revenue		2900
6	Rent revenue (2900*2)	5800
	Deferred rent revenue		5800