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Drake Ltd. provides engineering consulting services to various clients. The companys year-end is December 31 and adjusting entries are only prepared at year-end, on December
Drake Ltd. provides engineering consulting services to various clients. The companys year-end is December 31 and adjusting entries are only prepared at year-end, on December 31.
For each of the following situations, prepare the necessary adjusting entries on December 31, 2020. If no entry is required, clearly indicate by writing No Entry.
- On January 1, 2020, Drake Ltd had a balance in the Prepaid Insurance account in the amount of $3,600 representing 9 months insurance (up to September 30, 2020). On September 29, 2020 Drake purchased a 1 year insurance policy, beginning on October 1 for $3,000. Drake recorded the payment to Prepaid Insurance.
- On December 1, 2020 Drake Ltd. Received a deposit of $6,000 from Bieber Enterprises for engineering consulting services. On that date, Drake recorded the amount it received to Deferred Revenue. By December 31, 2020 Drake Ltd. had completed $1,800 of engineering services for Bieber Ltd.
- Drake pays its employees every Friday, $30,000 for a five-day work week (Monday to Friday). This year, December 31 falls on a Wednesday.
- On July 31, 2020, Drake Ltd. obtained a 6 month, 6% loan for $60,000. Interest on the loan is to be paid on January 31, 2021 when the loan matures.
- On November 1, 2020, Drake Ltd. purchased recording equipment for $30,000 by $9,000 cash and obtaining a loan for the balance. The estimated useful life of the equipment is 5 years.
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