Reference no: EM132493896

Zemax Inc. began operations on January 2. Its year end is December 31, and it adjusts its accounts annually. Selected transactions for the current year follow:

1. On January 2, purchased supplies for $3,500 cash. A physical count at December 31 revealed that $800 of supplies were still on hand.

2. Purchased a vehicle for $44,000 on April 1, paying $4,000 cash and signing a $40,000 bank loan for the balance. The vehicle is estimated to have a useful life of five years.

3. Purchased a $3,500, one-year insurance policy for cash on August 1. The policy came into effect on that date.

4. Received a $1,200 advance cash payment from a client on November 9 for services to be provided in the future. As at December 31, half of these services had been completed.

5. On December 1, the company rented additional office space for a six-month period starting on December 1 for $1,050 each month. It paid rent for the months of December and January in advance of this date.

Required:

Question 1. For each of the above situations, prepare the entry for the original transaction.

Question 2. For each of the above situations, prepare the adjusting entry required at December 31.