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Consider the following transactions for Huskies Insurance Company:
a. Equipment costing $42,000 is purchased at the beginning of the year for cash. Depreciation on the equipment is $7,000 per year.
b. On June 30, the company lends its chief financial officer $50,000; principal and interest at 7% are due in one year.
c. On October 1, the company receives $16,000 from a customer for a one-year property insurance policy. Deferred Revenue is credited.
Required: For each item, record the necessary adjusting entry for Huskies Insurance at its year-end of December 31. No adjusting entries were made during the year. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

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Answer:

31-Dec

Dr Depreciation expense $7,000

Cr Accumulated Depreciation - Equipment $7,000

31-Dec

Dr Interest receivable $1,750

Cr Interest revenue $1,750

31-Dec

Dr Deferred Revenue $4,000

Cr Revenue or Service Revenue $4,000

Explanation:

Preparation of Journal entries

31-Dec

Dr Depreciation expense $7,000

Cr Accumulated Depreciation - Equipment $7,000

(To adjust 12 month depreciation)

31-Dec

Dr Interest receivable $1,750

($50,000 x 7% x 6/12)

Cr Interest revenue $1,750

(To adjust 6 month interest revenue accrued)

31-Dec

Dr Deferred Revenue $4,000

($16,000 x 3/12)

Cr Revenue or Service Revenue $4,000

(To record earned revenue for 3 months
  • The journal entries are as follows:

On Dec 31

Depreciation expense $7,000

              Accumulated Depreciation - Equipment $7,000

Interest receivable $1,750 ($50,000 ×  7% × 6 ÷ 12)

        Interest revenue $1,750

Deferred Revenue $4,000 ($16,000 × 3 ÷ 12)

          Revenue or Service Revenue $4,000

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