ABC Ltd. provides computer software services to their customers. The company closes its accounts at the end of the calendar year. The manner in which the company has recorded several transactions occurring during 2021 is described as follows:

1. On 15 December, made full payment for a one-year insurance policy that goes into effect on 2 January 2022. The cost of the policy $120,000 was debited to Insurance expense account. (8 marks)

2. On 15 December, made full payment for a one-year insurance policy that goes into effect on 2 January 2022. The cost of the policy $120,000 was debited to Unexpired Insurance. (5 marks)

3. Payroll expense is recorded when employees are paid, Payday for the last two weeks of December falls on 3 January 2022. (8 marks)

Required:

For each item aboveexplain whether an adjusting entry is needed at 31 December 2021, and state the reason for your answer. If you recommend an adjusting entry, explain the effects your entry would have on assets, liabilities, equity, revenue and expenses in the 2021 financial statement.