Reference no: EM132862956

Question - John Smith, an accountant, had the following transactions related to his accounting service business during June. Ignore GST.

Purchased office furniture for $40 000. The furniture will be depreciated over a useful life of 10 years at which time it is expected to have a residual value of $4 000.

Purchased a 12-month fire insurance policy for $6 000. Borrowed $50 000 from the ABC Bank on a short-term loan. The principal, plus 10% annual interest, will be repaid in 3 months.

Purchased supplies for $700. On 30 June, supplies worth $230 remained on hand. Paid $1 000 for 2 months' rent for the period 15 June to 15 August.

Received an electronic bank transfer from a client for $2 000 as an advance payment for services to be performed. Only 30% of the work was completed by 30 June.

Received an invoice for $550 for telephone and internet charges for the month.

Required -

(1) Prepare the journal entries to record each transaction;

(2) Prepare necessary adjusting entries as at 30 June, the end of the accounting year.