Reference no: EM132648305

Problem 1: For each adjusting entry, identify whether it is an accrual or a deferral.

1. A two-year fire insurance policy was purchased on July 1, 20X1 for $6,000. The company originally debited Prepaid insurance expense for the entire amount.

2. Equipment costing $78,000 with an 6 year life and a salvage value of $6,000 had been purchased on Sept. 1, 20X1. Use the straight-line depreciation method.

3. Utility expenses of $3,000 that have not been previously recorded will be paid in early January 20X2.

4. On May 1, 20X1 collected $24,000 in advance for services to be performed evenly over the next 12 months and credited Service Revenue at that time.

5. On March 1, 20X1, the company borrowed $100,000 for 2 years at 6% from Alliance Bank. Interest is paid annually.