$3-1$A $-5$ types of Adjustments

This problem explores $5$ common types of adjusting journal entries. All problems relate to ABC Company, which has a fiscal year$-$end of December $31.$

a$.)$ Prepaid expenses $-$ Insurance

ABC Company purchases a one$-$year insurance policy on June $1,2017$ for $$1,800$ cash.

Required

Record the entry for the purchase of insurance and for the year$-$end adjustment.

b$.)$ Depreciation

ABC Company purchases a vehicle on August $31,2017$ for $$15,000$ cash. The vehicle is expected to be useful for $10-$years, after which time it will have no residual value. The company wishes to use straight$-$line depreciation.

Required

Record the journal entry for the purchase of the vehicle and for the year$-$end adjustment.

c$.)$ Accrued expenses $-$ Interest

On May $1,2017,$ ABC Company borrows $$10,000$ from the bank and signs a note payable. The debt carries annual interest of $10\%$ and is repaid in full $($with interest$)$ on July $31,2018.$

Required

Record the journal entry for the initial borrowing, the year$-$end adjustment and the repayment of the debt.

d$.)$ Accrued revenues

As at December $31,2017,$ ABC Company had provided $3$ months of consulting service to a client at a rate of $$1,000$ per month, but had not yet billed the client or collected any money. On January $31,2018$ the client was billed for four months of service and paid one week later on February $8,2018$

Required

Record the journal entry for the year$-$end adjustment, and any other entries required.

e$.)$ Unearned revenues

A client pre$-$pays ABC Company on November $1,2017$ for five months of consulting service $($from November through the end of March$).$ The company pays $$15,000.$ ABC Company earns the money evenly over the life of the project, and has fulfilled its obligations up to December $31.$

Required

Record the journal entry November $1$ and for the year$-$end adjustment.