A review of the ledger of Khan Company at December 31, 2006. produces the following data pertaining to the preparation of annual adjusting entries.

1. Prepaid Insurance $9,800. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2005, for $6,000.

The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2006, for $4,800. This policy has a term of 2 years.

2. Unearned Subscriptions $49,000. The company began selling magazine subscriptions in 2006 on an annual basis. The magazine is published monthly. The selling price of a subscription is

$50. A review of subscription contracts reveals the following.

3. Notes Payable $40,000. This balance consists of a note for 6 months at an annual interest rate of 9%, dated September 1.
4. Salaries Payable $0. There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $500 each per week, and three employees earn $800 each per week. December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.
Instructions Prepare the adjusting entries at December 31. 2006.

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Subscription Date Number of Subscriptions 200 October 1 November 1 December 1 300 480 980