A review of the ledger of the Montana Company at December 31, 1996, produces the follewing data pertaining to the preparation of annual adjusting entries:
1. Prepaid Insurance \(\$ 12,800\). The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 1995 , for \(\$ 9,600\). The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 1996, for \(\$ 4,800\). This policy has a term of 2 years.
2. Unearned Subscription Revenue \(\$ 49,000\). The company began selling magazine subscriptions in 1996 on an annual basis. The selling price of a subscription is \(\$ 50\). A review of subscription contracts reveals the following:

\begin{tabular}{|c|c|}
\hline \begin{tabular}{l}
Subscription \\
Date \end{tabular} & \begin{tabular}{l}
Number of \\
Subscriptions \end{tabular} \\
\hline October 1 & 200 \\
\hline November 1 & 300 \\
\hline \multirow{2}{*}{ December 1} & 480 \\
\hline & 980 \\
\hline \end{tabular}
3. X Xotes Payable, \(\$ 50,000\). This balance consists of a note for 6 months at an annual interost rate of \(9 \%\), dated September 1 .
4. Salaries Payable \(\$ 0\). There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of \(\$ 600\) each per week, and three employees earn \(\$ 700\) each per week. December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.
Instructions Prepare the adjusting entries at December 31, 1996.

Transcribed Image Text:

Subscription Date Number of Subscriptions October 1 200 November 1 300 December 1 480 980