Can someone please check this? Gomez Company had the following transactions in the last two months of its year ended December 31. November 1 Paid $2,000 cash for future advertising. November 1 Paid $3,120 cash for 12 months of insurance through October 31 of the next year. November 30 Received $6,600 cash for future services to be provided to a customer. December 1 Paid $12,000 cash for consulting to be received over the next eight months. December 15 Received $10,550 cash for future services to be provided to a customer. December 31 Of the advertising paid for on November 1, $1,450 worth is not yet used. December 31 A portion of the insurance paid for on November 1 has expired. No adjustment was made in November. December 31 Services worth $1,100 are not yet provided to the customer who paid on November 30. December 31 One-eighth of the consulting paid for on December 1 has been received. December 31 The company has performed $3,900 of services that the customer paid for on December 15. Required: Prepare entries for these transactions under the method that initially records prepaid expenses as assets and records unearned revenues as liabilities. Also prepare adjusting entries at the end of the year. Prepare entries for these transactions under the method that initially records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.
Can someone please check this? Gomez Company had the following transactions in the last two months of its year ended December 31. November 1 Paid $2,000 cash for future advertising. November 1 Paid $3,120 cash for 12 months of insurance through October 31 of the next year. November 30 Received $6,600 cash for future services to be provided to a customer. December 1 Paid $12,000 cash for consulting to be received over the next eight months. December 15 Received $10,550 cash for future services to be provided to a customer. December 31 Of the advertising paid for on November 1, $1,450 worth is not yet used. December 31 A portion of the insurance paid for on November 1 has expired. No adjustment was made in November. December 31 Services worth $1,100 are not yet provided to the customer who paid on November 30. December 31 One-eighth of the consulting paid for on December 1 has been received. December 31 The company has performed $3,900 of services that the customer paid for on December 15. Required: Prepare entries for these transactions under the method that initially records prepaid expenses as assets and records unearned revenues as liabilities. Also prepare adjusting entries at the end of the year. Prepare entries for these transactions under the method that initially records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Question
Can someone please check this?
Gomez Company had the following transactions in the last two months of its year ended December 31.
| November 1 | Paid $2,000 cash for future advertising. |
|---|---|
| November 1 | Paid $3,120 cash for 12 months of insurance through October 31 of the next year. |
| November 30 | Received $6,600 cash for future services to be provided to a customer. |
| December 1 | Paid $12,000 cash for consulting to be received over the next eight months. |
| December 15 | Received $10,550 cash for future services to be provided to a customer. |
| December 31 | Of the advertising paid for on November 1, $1,450 worth is not yet used. |
| December 31 | A portion of the insurance paid for on November 1 has expired. No adjustment was made in November. |
| December 31 | Services worth $1,100 are not yet provided to the customer who paid on November 30. |
| December 31 | One-eighth of the consulting paid for on December 1 has been received. |
| December 31 | The company has performed $3,900 of services that the customer paid for on December 15. |
Required:
- Prepare entries for these transactions under the method that initially records prepaid expenses as assets and records unearned revenues as liabilities. Also prepare
adjusting entries at the end of the year. - Prepare entries for these transactions under the method that initially records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.
Transcribed Image Text:**Accounting Journal Entries and Adjustments**
This section covers the preparation of journal entries for various transactions under a method that initially records prepaid expenses as expenses and unearned revenues as revenues. Adjusting entries will also be made at the end of the year. Please note that if no entry is required for a transaction/event, you should select "No journal entry required" in the first account field.
Below is the detailed breakdown of the transactions and their journal entries:
| No | Date | General Journal | Debit | Credit |
|----|---------------|-------------------------|-------|--------|
| 1 | November 01 | Prepaid advertising | 2,000 | |
| 2 | November 01 | Prepaid insurance | 3,120 | |
| 3 | November 30 | Unearned revenue | | 6,600 |
| 4 | December 01 | Prepaid consulting | 12,000| |
| 5 | December 15 | Unearned revenue | | 10,550 |
| 6 | December 31 | No journal entry required | | |
| 7 | December 31 | No journal entry required | | |
| 8 | December 31 | No journal entry required | | |
| 9 | December 31 | No journal entry required | | |
| 10 | December 31 | Service revenue | | 3,900 |
Explanation of Entries:
1. **November 01 - Prepaid Advertising**:
- An amount of $2,000 was paid for advertising, recorded as a prepaid expense.
2. **November 01 - Prepaid Insurance**:
- An amount of $3,120 was paid for insurance, recorded as a prepaid expense.
3. **November 30 - Unearned Revenue**:
- Revenue of $6,600 was received but not yet earned, hence recorded as unearned revenue.
4. **December 01 - Prepaid Consulting**:
- An amount of $12,000 was paid for consulting services, recorded as a prepaid expense.
5. **December 15 - Unearned Revenue**:
- Revenue of $10,550 was received but not yet earned, hence recorded as unearned revenue.
6
Transcribed Image Text:### Educational Website Content: Understanding Journal Entries for Prepaid Expenses and Unearned Revenues
#### Overview:
This instruction aims to teach how to prepare journal entries for transactions under the method that records prepaid expenses as assets and records unearned revenues as liabilities. Additionally, it includes preparing adjusting entries at the end of the year.
**Note**: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
#### Journal Entries:
| No | Date | General Journal | Debit | Credit |
|----|-------------------|-----------------------|--------|---------|
| 1 | November 01 | Prepaid advertising | 2,000 | |
| 2 | November 01 | Prepaid insurance | 3,120 | |
| 3 | November 30 | Unearned revenue | | 6,600 |
| 4 | December 01 | Prepaid consulting | 12,000 | |
| 5 | December 15 | Unearned revenue | | 105,500 |
| 6 | December 31 | No journal entry required | | |
| 7 | December 31 | No journal entry required | | |
| 8 | December 31 | No journal entry required | | |
| 9 | December 31 | No journal entry required | | |
| 10 | December 31 | Service revenue | 3,900 | |
#### Explanation of Entries:
1. **November 01 (Prepaid Advertising)**:
- Debit: Prepaid advertising (asset) for $2,000. This represents payment for advertising at a future date, considered a prepaid expense.
2. **November 01 (Prepaid Insurance)**:
- Debit: Prepaid insurance (asset) for $3,120. This entry records payment for insurance coverage to be used in the future, categorized as a prepaid expense.
3. **November 30 (Unearned Revenue)**:
- Credit: Unearned revenue (liability) for $6,600. This is cash received in advance for a service or product to be delivered later.
4. **December 01 (Prepaid Consulting)**:
- Debit: Prepaid consulting (asset) for $
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