Reference no: EM132871955

Question - Teal Corporation prepares annual financial statements and therefore adjusts its accounts on December 31, 2020. The following information is available for year 2020:

a. Teal purchased supplies of $2,700 in January. At December 31, there was $1,500 of supplies on hand.

b. The $17,000 note payable was issued on September 1, 2020. It is a 12%, 6-month note, so the interest for each month is 17,000*12%*(1/12)= $170. The company does not pay interest until the due date (Mar 1st, 2021).

c. Teal paid for a one-year insurance policy of $1,800. Coverage began on March 1, 2020.

d. At December 31, Teal determines that it has performed service of $1,000 for Blue Corporation, although the company has not billed Blue Corporation yet.

Required -

(1) Journalize the appropriate adjusting entries on December 31, 2020.

(2) Indicate the direction of effects (Increase, Decrease, or No Effect) of each adjusting entry on the three elements of the Balance Sheet (Assets, Liabilities, and SE).