A company has a fiscal year-end of December 31: (1) on October 1, $12,000 was paid for a one-year fire insurance

Question

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 advanced its chief financial officer $10,000; principal and interest at 6% on the note 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.

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Solution Date General Journal Debit Credit 31-Dec Insurance expense $ 3,000 Prepaid insurance $ 3,000 (To record insurance expired) 31-Dec Interest receivable $ 300 Interest revenue $ 300 (To record interest accrued on notes receivable) 31-Dec Depreciation expense $ 12,000 Accumulated depreciation $ 12,000 (To record depreciation expense) Working Date General Journal Debit Credit Dec 31 Insurance expense =12000/12 x 3 Prepaid insurance =12000/12 x 3 (To record insurance expired for 3 months Oct to Dec) Dec 31 Interest receivable =10000 x 6% x (6/12) Interest revenue =10000 x 6% x (6/12) (To record interest accrued on notes receivable) Dec 31 Depreciation expense 12000 Accumulated depreciation 12000 (To record depreciation expense)

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Date	General Journal	Debit	Credit
31-Dec	Insurance expense	$ 3,000
	Prepaid insurance		$ 3,000
	(To record insurance expired)

31-Dec	Interest receivable	$ 300
	Interest revenue		$ 300
	(To record interest accrued on notes receivable)

31-Dec	Depreciation expense	$ 12,000
	Accumulated depreciation		$ 12,000
	(To record depreciation expense)