Chapter 2, Problem 2.6BE

Adjusting entries; income determination

• LO2–4, LO2–5

If the adjusting entries prepared in BE 2–5 were not recorded, would net income be higher or lower and by how much?

BE 2–4

Journal entries

• LO2–2

Prepare journal entries for each of the following transactions for a company that has a fiscal year-end of December 31: (1) on October 1, $12,000 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer $10,000; principal and interest at 6% are due in one year; and (3) equipment costing $60,000 was purchased at the beginning of the year for cash.

BE 2–5

Adjusting entries

• LO2–5

Prepare the necessary adjusting entries at December 31 for each of the items listed in BE 2–4. Depreciation on the equipment is $12,000 per year.