Example similar to P3-3A Record adjusting entries

The information necessary for preparing the 2022 year-end adjusting entries for Urban
Advertising Agency appears below. Urban’s fiscal year-end is December 31.

1. On July 1, 2022, Urban receives $7,000 from a customer for advertising services to be given
evenly over the next 7 months. Urban credits Deferred Revenue.
2. At the beginning of the year, Urban’s depreciable equipment has a cost of $40,000, a
four-year life, and no salvage value. The equipment is depreciated evenly (straight-line
depreciation method) over the four years.
3. On May 1, 2022, the company pays $9,600 for a two-year fire and liability insurance
policy and debits Prepaid Insurance.
4. On September 1, 2022, the company borrows $10,000 from a local bank and signs a note.
Principal and interest at 6% will be paid on August 31, 2023.
5. At the beginning of the year, there was a $2,000 debit balance in the Supplies (asset)
account. Only $500 of supplies remains on hand at year end.

Required:

Record the necessary adjusting entries on December 31, 2022. No prior adjustments have
been made during 2022. (Do not round intermediate calculations. If no entry is required for a
particular transaction/event, select "No Journal Entry Required" in the first account field.)

Date General Journal Debit Credit

1 December 31 Deferred Revenue 6,000
Service Revenue 6,000
7,000 / 7 x 6
2 December 31 Depreciation Expense 10,000
Accumulated Depreciation 10,000
40,000 / 4
3 December 31 Insurance Expense 3,200
Prepaid Insurance 3,200
9,600 / 24 x 8
4 December 31 Interest Expense 200
Interest Payable 200
10,000 x .06 x 4/12
5 December 31 Supplies Expense 1,500
Supplies 1,500
2,000 - 500