Pummel and Drool, a law firm, made the following transactions in 2021:

1. On March 1, purchased an advanced copier/scanner/filer for $60,000 cash. The scanner is estimated to have a useful life of 5 years and a residual value of $2,000.

2. On May 1, loaned $18,000 to Atty. Pummel in exchange for a 9% note, in which Atty. Pummel will pay both principal and interest back to the firm in one year.

3. On October 31, paid $10,800 for a six month malpractice insurance policy.

4. On November 30, a client paid the firm $39,000 for on-call legal services from December 1, 2021 to February 28, 2022.

Instructions:

a. Create the journal entries for the four transactions above.

b. Assume Pummel and Drools fiscal year end is December 31, 2021 and that no adjusting entries related to the transactions above were posted prior to this date. Create the related adjusting journal entries for each of the situations above. Also, label each AJE as to type.

c. If Pummel and Drools net income on 12/31/21 before the AJEs was $485,600, what is it after the AJEs are posted?

d. Create any entries in 2022 relating to the transactions listed above.