Chapter 3 Class Examples - Adjusting Entries Please prepare adjusting entries based on the information that is provided below. 1. David's restaurant purchases insurance service from Reese's insurance company. On Nov. 23, 2020, David paid $3,000 for the insurance service to Reese's insurance company for the month of December, January, and February. A. Please prepare journal entries for both David's restaurant and Reese's insurance company on Nov. 23. B. Please prepare the adjusting entries for both companies on Dec. 31 assuming Dec. 31 is the fiscal year end 2. Following up question 1, assuming that both the restaurant and the insurance company hired a bookkeeper who don't understand accrual accounting very well. Both David and Reese told their bookkeeper that they could use the cash basis for recording on Nov. 23. A. Please record the journal entries for both companies on Nov. 23 based on the assumption above. I B. What adjusting entries can both companies prepare as the year-end adjusting entries on Dec. 31 to make sure the ending balance of the related accounts are consistent with the accrual basis after the adjustment. 3. Following up question 1 (NOT question 2), assuming that the accountants in David's restaurant forgot about the adjusting entry at the fiscal year-end, how could this mistake affect the restaurant's Net Income, Assets, Liabilities, and Stockholders' Equity? 4. Following up question 1 (NOT question 2), assuming that the accountants in Reese's Insurance Company forgot about the adjusting entry at the fiscal year-end, how could this mistake affect the restaurant's Net Income, Assets, Liabilities, and Stockholders' Equity