Feb. 1 Borrowed $12,000 from a bank and signed a note. Principal and interest at 10% will be paid on January 31, 2022. Apr. 1 Paid $3,600 to an insurance company for a two-year fire insurance policy. July 17 Purchased supplies costing $2,800 on account. The company records supplies purchased in an asset account. At the year-end on December 31, 2021, supplies costing $1,250 remained on hand. Nov. 1 A customer borrowed $6,000 and signed a note requiring the customer to pay principal and 8% interest on April 30, 2022. Required: 1. Record each transaction in general journal form. 2. Prepare any necessary adjusting entries at the year-end on December 31, 2021. No adjusting entries were recorded during the year for any item.

I have attached two screen shots of a Excel Sheet. One contains the required Journal Entries, while the other has Adjusting Entries.

Explanation:

I am sure you would have no problem in the Journal Entries, if you have questions you can ask them. I will explain the adjusting entries here for you.

1) The business has borrowed $12,000 @10%, so we have to make adjusting entry for the interest expense accrued for 11 months. The formula to be used is:

                                (12,000)*(10%)*(11/12)

2) Prepaid Insurance is your asset account. At the year end, we have to write off the amount expired of 9 months.

                                  (3,600/2)*(9/12)

3) Entry for Cost of Goods Sold can be done in the Journal Entries as well. We have 1,250 supplies on hand at year end. It means the business has sold the remaining figure.

4) Like we did adjustment for Interest Expense. Similarly, it is to be done for the Interest Receivable from the customer.

If you have any queries regarding concepts used, you can openly ask them.

Thank you

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