Challenge: Record the adjusting entries at December 31, using T-accounts.

George Company had these adjusting entry situations at the end of December:

1. On May 1, George Company paid $960 for a two-year insurance policy. The policy was for the

period May 1 through April 30 (2 years). This is the first year of the policy. The transaction was

recorded as insurance expense.

2. On December 1, George Company purchased $400 of supplies for cash. The purchase was

recorded as an asset, supplies. On December 31, it was determined that various supplies had been

consumed in operations and that supplies costing $300 remained on hand.

3. George Company holds a note receivable for $4,000. This note is interest-bearing. The interest

will be received when the note matures. The note is a one-year note receivable made on June 30,

bearing 5% simple interest.

4. George Company owes salaries in the amount of $800 at the end of December.

5. As of December 31, George Company had received $600 for services to be performed. These

services had not been performed as of December 31. A liability, Unearned Revenue, needs to be

recognized, and revenue needs to be reduced.

6. On December 20, George Company received a $400 bill for advertising in December. The liability

account, Accounts Payable, needs to be recognized along with the related expense.