Buzzard Bicycle Adjusting Entries Entry Account Debit Credit 1. Insurance Expense 2. Prepaid Insurance (Reduce prepaid insurance for six months used of 36 months paid in advance) Salaries Expense Salaries Payable (Record salaries owed at December 31) 3. Deferred Revenue Service Revenue (Reduce deferred revenue for completion of four custom bikes of six custom bikes paid for in advance) 4. Supplies Expense Supplies (Supplies used during year) 5. Advertising Expense 6. Prepaid Advertising (Reduce prepaid advertising for one month used of four months prepaid) Interest Expense Interest Payable (Record ten months interest expense not yet paid) BUZZARD BICYCLE December 31 Financial information: 1. Purchased 3-year fire Insurance policy on July 1. Debited Prepaid Insurance for the entire amount. 2. Employee salaries for December, to be paid in January. 3. Received cash for 6 custom bikes on November 1. Entire amount credited to Deferred Revenue. Four bikes completed by December 31. 4. Supplies at beginning of year. Supplies purchased during year. Debited to Supplies. Supplies remaining at end of year. $ 18,000 25,000 6,000 $ 5. Paid for four months of advertising on December 1. $ SSSSS 2,000 18,000 4,000 12,000 Entire amount debited to Prepaid Advertising. Ads will appear evenly over four-month period. 6. Borrowed cash on March 1. $ 36,000 Principal due. Annual rate of interest due each March 1 5 years 10%