Action Quest Games adjusts its accounts annually. The following information is available for the year ended December 31, 2025.

1. Purchased a 1-year insurance policy on June 1 for $1,800 cash.

2. Paid $6,500 on August 31 for 5 months’ rent in advance.

3. On September 4, received $3,600 cash in advance from a company to sponsor a game night each month for a total of 9 months for the most improved students at a local school.

4. Signed a contract for cleaning services starting December 1 for $1,000 per month. Paid for the first 2 months on November 30. (Hint: Use the account Prepaid Cleaning to record prepayments.)

5. On December 5, received $1,500 in advance from a gaming club. Determined that on December 31,

$475 of these games had not yet been played.

Instructions

a. For each of the above transactions, prepare the journal entry to record the initial transaction.

b. For each of the above transactions, prepare the adjusting journal entry that is required on December 31.

c. Post the journal entries in parts (a) and (b) to T-accounts and determine the final balance in each account balance.