The following transactions all occurred on January 2 of the current year:
1. A company paid a $2,000 bill for a fire insurance policy that covers the current year and next year.
2. A company purchased for $200 a trash compactor that has an expected life of five years.
3. Two attorneys, working under a corporate structure, decide that a ski chalet at Vail is necessary to entertain current and prospective clients. At the same time, they are considering the addition of a third attorney. This new attorney has a ski chalet that she purchased five years ago for $120,000. Its current market value is $200,000.
Required
a. Prepare the journal entries to record these transactions. Record the acquisition of the ski chalet when the new attorney is hired and it is transferred to the corporation.
b. Prepare any necessary adjusting entries for the company’s December 31 year-end (such as depreciation expense).
c. Post all journal entries to T-accounts.
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