Use the following information to answer the below questions pertaining to the adjusting entries of Afaaq Company and Noor Takaful.

Afaaq Company purchased an insurance policy for $5,000 on December 1, 2018, from Noor Takaful. The premium paid on Decem- ber 1 to Noor Takaful for the 12 months beginning December 1 is $1,200. This premium was recorded on December 1 by Afaaq as Dr. Prepaid Insurance account and Cr. Cash account. Noor Takaful recorded the $1,200 receipt as of December 1 with a debit to the current asset Cash and a credit to the current liability Unearned Revenues. Both Afaaq Company and Noor Takaful prepare monthly financial statements at the end of each month.

1. Adjusting entries in both companies are recorded on which date?

2. State the number of accounts involved in the adjusting entries of Afaaq Company.

3. Which account should be debited in the books of Afaaq Company?

4. Which account should be credited in the books of Afaaq Company?

5. What is the amount of the debit and the credit in the books of Afaaq Company?

6. IfAfaaqfailstomakethenecessaryadjustingentryonDecember31, what would be the effect of this on the financial statements?

7. State the number of accounts involved in Noor Takafuls adjusting entry.

8. Which account should be debited in Noor Takafuls books?

9. Which account should be credited in Noor Takafuls books?

10. What is the amount of the debit and the credit in Noor Takafuls books?

11. If the company fails to make the adjusting entry on December 31, what would be the effect of this on Noor Takafuls financial statements?