Reference no: EM132172876
Question - Prepare the necessary adjusting journal entries at December 31, 2016.
On July 1, 2016, purchased $19,000 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1. The annual interest rate is 10%.
Vito's depreciable equipment has a cost of $6,000, a five-year life, and no salvage value. The equipment was purchased in 2014. The straight-line depreciation method is used.
On November 1, 2016, the bar area was leased to Jack Donaldson for one year. Vito's received $8,400 representing the first six months' rent and credited deferred rent revenue.
On April 1, 2016, the company paid $1,440 for a two-year fire and liability insurance policy and debited insurance expense.
On October 1, 2016, the company borrowed $12,000 from a local bank and signed a note. Principal and interest at 10% will be paid on September 30, 2017.
At year-end, there is a $1,250 debit balance in the supplies (asset) account. Only $620 of supplies remain on hand.