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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F43d4c690-5234-43d7-b8ad-e6926765a5c0%2F42a8047a-d177-4915-a4c3-167fbd64116e%2Fhprohee.png&w=3840&q=75)
Transcribed Image Text: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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