(Prepare adjusting entries, LO 3, 5) For each of the following situations provide the necessary adjusting entries for Truax Ltd. for the year ended June 30, 2004. (These situations are tricky. When preparing each adjusting entry, compare what is recorded in the accounting system before you make your entry with what you think should be in the accounting system. Your adjusting entry should take the accounting system from “what is” recorded to “what should be” recorded.)

a. On January 2, 2004 Truax Ltd. purchased a two-year insurance policy for

$20,000 cash. The transactional journal entry debited Insurance Expense for

$20,000 and credited Cash for $20,000.

b. On June 1, 2004 Truax Ltd. received $5,000 for goods that it would produce and deliver to a customer in November 2004. Truax Ltd. recorded the transaction by debiting Cash for $5,000 and crediting Revenue for $5,000.

c. On March 1, 2004, Truax Ltd. invested $200,000 of surplus cash in a one-year investment certificate that paid 0.5% per month. The $200,000 initial investment plus the interest of $12,000 were to be paid on February 28, 2005. On March 1, 2004 Truax Ltd. recorded the investment by debiting Investments for

$200,000 and crediting Cash for $200,000. It also debited Accounts Receivable for $12,000 and credited Interest Revenue for $12,000.