Understanding the alternative treatment of prepaid expenses and unearned revenuesRapid Way Pack’n Mail completed the following transactions during 2018:RequirementsJournalize the transactions assuming that Rapid Way debits an asset account for prepaid expenses and credits a liability account for unearned revenues.Journalize the related adjusting entries at December 31, 2018.Post the journal and adjusting entries to the T-accounts, and show their balances at December 31, 2018. (Ignore the Cash account.)Repeat Requirements 1-3. This time, debit an expense account for prepaid expenses and credit a revenue account for unearned revenues.Compare the account balances in Requirements 3 and 4. They should be equal. Nov. 1 Paid $9,600 store rent covering the six-month period endingApril 30, 2019.Nov. 1 Paid $6,000 insurance covering the five-month period endingMarch 31, 2019.Dec. 1 Collected $9,000 cash in advance from customers. The servicerevenue will be earned $1,800 monthly over the five-monthperiod ending April 30, 2019.Dec. 1 Collected $7,200 cash in advance from customers. The servicerevenue will be earned $2,400 monthly over the three-monthperiod ending February 28, 2019.

Hey, since there are multiple requirements posted, we will answer first three requirements. If you…

Answered: Nov. 1 Paid $9,600 store rent covering…

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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Understanding the alternative treatment of prepaid expenses and unearned revenues

Rapid Way Pack’n Mail completed the following transactions during 2018:

Requirements

Journalize the transactions assuming that Rapid Way debits an asset account for prepaid expenses and credits a liability account for unearned revenues.
Journalize the related adjusting entries at December 31, 2018.
Post the journal and adjusting entries to the T-accounts, and show their balances at December 31, 2018. (Ignore the Cash account.)
Repeat Requirements 1-3. This time, debit an expense account for prepaid expenses and credit a revenue account for unearned revenues.
Compare the account balances in Requirements 3 and 4. They should be equal.

Nov. 1 Paid $9,600 store rent covering the six-month period ending
April 30, 2019.
Nov. 1 Paid $6,000 insurance covering the five-month period ending
March 31, 2019.
Dec. 1 Collected $9,000 cash in advance from customers. The service
revenue will be earned $1,800 monthly over the five-month
period ending April 30, 2019.
Dec. 1 Collected $7,200 cash in advance from customers. The service
revenue will be earned $2,400 monthly over the three-month
period ending February 28, 2019.

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