Exercise 3-20 When the accounts of Sunland Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $5,952, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. 2. On November 1, Rent Revenue was credited for $1,668, representing revenue from a subrental for a 3-month period beginning on that date. 3. Purchase of advertising materials for $745 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $317 are on hand. 4. Interest of $793 has accrued on notes payable. Prepare the following in general journal form. (a) The adjusting entry for each item. (b) The reversing entry for each item where appropriate. Explain why a reversing entry is appropriate or inappropriate for each adjusting entry.

Exercise 3-20 When the accounts of Sunland Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. The prepaid insurance account shows a debit of $5,952, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. 2. On November 1, Rent Revenue was credited for $1,668, representing revenue from a subrental for a 3-month period beginning on that date. 3. Purchase of advertising materials for $745 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $317 are on hand. 4. Interest of $793 has accrued on notes payable. Prepare the following in general journal form. (a) The adjusting entry for each item. (b) The reversing entry for each item where appropriate. Explain why a reversing entry is appropriate or inappropriate for each adjusting entry.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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