Prepare the following adjusting entries:

On March 1, ABC purchased a one-year liability insurance policy for $98,400. Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14. Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entry is correct.

Depreciation expense must be recorded for the month of December. The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight-line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November.

On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December 1 was as follows: Dr Cash 36,000 Cr Unearned rent revenue 36,000 The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14.

Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14.

On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item) Dr Cash 235,000 Cr Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note.

ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $80,000. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. (This includes closing Purchases.) Purchases balance: 332,700

It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. Book Value of intangible asset is $37500.