Faraday Electronic Service repairs stereos and DVD players. During 2019, Faraday engaged inthe following activities:a. On September 1, Faraday paid Wausau Insurance $4,860 for its liability insurance for thenext 12 months. The full amount of the prepayment was debited to prepaid insurance.b. At December 31, Faraday estimates that $1,520 of utility costs are unrecorded and unpaid.c. Faraday rents its testing equipment from JVC. Equipment rent in the amount of $1,440 isunpaid and unrecorded at December 31.d. In late October, Faraday agreed to become the sponsor for the sports segment of the eveningnews program on a local television station. The station billed Faraday $4,350 for3 months’ sponsorship—November 2019, December 2019, and January 2020—in advance.When these payments were made, Faraday debited prepaid advertising. At December 31,2 months’ advertising has been used and 1 month remains unused.Required:1. Prepare adjusting entries at December 31 for these four activities.2. CONCEPTUAL CONNECTION What would be the effect on expenses if the adjustingentries were not made?
Faraday Electronic Service repairs stereos and DVD players. During 2019, Faraday engaged inthe following activities:a. On September 1, Faraday paid Wausau Insurance $4,860 for its liability insurance for thenext 12 months. The full amount of the prepayment was debited to prepaid insurance.b. At December 31, Faraday estimates that $1,520 of utility costs are unrecorded and unpaid.c. Faraday rents its testing equipment from JVC. Equipment rent in the amount of $1,440 isunpaid and unrecorded at December 31.d. In late October, Faraday agreed to become the sponsor for the sports segment of the eveningnews program on a local television station. The station billed Faraday $4,350 for3 months’ sponsorship—November 2019, December 2019, and January 2020—in advance.When these payments were made, Faraday debited prepaid advertising. At December 31,2 months’ advertising has been used and 1 month remains unused.Required:1. Prepare adjusting entries at December 31 for these four activities.2. CONCEPTUAL CONNECTION What would be the effect on expenses if the adjustingentries were not made?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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| Faraday Electronic Service repairs stereos and DVD players. During 2019, Faraday engaged in the following activities: a. On September 1, Faraday paid Wausau Insurance $4,860 for its liability insurance for the next 12 months. The full amount of the prepayment was debited to prepaid insurance. b. At December 31, Faraday estimates that $1,520 of utility costs are unrecorded and unpaid. c. Faraday rents its testing equipment from JVC. Equipment rent in the amount of $1,440 is unpaid and unrecorded at December 31. d. In late October, Faraday agreed to become the sponsor for the sports segment of the evening news program on a local television station. The station billed Faraday $4,350 for 3 months’ sponsorship—November 2019, December 2019, and January 2020—in advance. When these payments were made, Faraday debited prepaid advertising. At December 31, 2 months’ advertising has been used and 1 month remains unused. Required: 1. Prepare 2. CONCEPTUAL CONNECTION What would be the effect on expenses if the adjusting entries were not made? |
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