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Adjustment journal entires

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For each of the following situations, determine the necessary adjustments.
1. A firm purchased a two-year insurance policy for $6,000 on July 1, 2007. T $6,000 was debited to the prepaid insurance account. What adjustment should be made to record expired insurance on the firm's July 31, 2007,worksheet?

2. On December 1, 2007, a firm signed a contractwith a local radio station for advertising that will extend over a one-year. The firm paid $5,400 in advance and debited the amount to Prepaid Advertising. What adjustment shouldbe made to record expired advertising on the firm's Decemr 31, 2007, worksheet?

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Solution Summary

This explains the way to make journal entries for transaction involving adjustments

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1.

Adjustment would be that insurance expenses will be recorded for six months and it will be 2000/4=$500

The entry will be

Insurance expenses debit $500
Prepaid insurance credit $500

2.
Adjustment would be that advertising expenses will be recorded for one month and it will be ...

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