Notes Problems Problem 1 Part A: Prepare journal entries for each of the following transactions for the barbecue restaurant The Grill Next Door. a. On October 1, $15,000 was paid for a one-year fire insurance policy. b. On June 30, the company lent its chief financial officer $10,000; principal and interest at 5% are due in one year. c. Equipment costing $60,000 was purchased at the beginning of the year for cash. Part B: Prepare the necessary adjusting entries at December 31 (year-end) related to the entries above. Depreciation is $12,000 per year. a. Insurance policy b. Loan to CFO c. Equipment Part C: If the adjusting entries above were not recorded, would net income be higher or lower and by how much? Notes Problems Problem 2 Sneaker store Feet First prepares monthly financial statements for its bank. The November 30 and December 31, 2016 trial balances contained the following accounting information: Supplies Prepaid insurance Salaries payable Deferred rent revenue November 30 Debit Credit 1,500 6,000 10,000 2,000 December 31 Debit Credit 3,600 4,700 15,000 1.000 The following information is also known: a. The December income statement reported $2,000 in supplies expense. b. No insurance payments were made in December. c. $10.000 was paid to employees during December for salaries. d. On November 1, 2016, a tenant paid Feet First in advance for rent for the period November through January. Deferred rent revenue was credited. Required: 1. What was the cost of supplies purchased during December? 2. What was the adjusting entry recorded at the end of December for prepaid insurance? Notes Problems 3. What was the adjusting entry recorded at the end of December for accrued salaries? 4. What was the amount of rent received on November 1? What was the amount of rent revenue recognized in December? What adjusting entry was recorded at the end of December for deferred rent? Rent received on Nov. 1: Rent revenue recognized in December: Adjusting entry