A review of the ledger of Obi Company at December 31, 2010, produces the following data pertaining to the preparation of annual adjusting entries.
1. Prepaid Insurance $9,900. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on April 1, 2009, for $7,200.
The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2010, for $4,500.This policy has a term of 2 years.
2. Unearned Subscriptions $45,000.The company began selling magazine subscriptions in 2010 on an annual basis. The magazine is published monthly. The selling price of a subscription is $45. A review of subscription contracts reveals the following.
3. Notes Payable $100,000.This balance consists of a note for 9 months at an annual interest rate of 9%, dated November 1.
4. Salaries Payable $0.There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $700 each per week, and three employees earn $500 each per week. Assume December 31 is a Tuesday. Employees do not work weekends.
All employees worked the last 2 days of December.
Instructions
Prepare the adjusting entries at December 31, 2010.