Chapter 2, Problem 2.8BE

Income determination

• LO2–4

If none of the adjusting journal entries prepared in BE 2–7 were recorded, would assets, liabilities, and shareholders’ equity on the 12/31/18 balance sheet be higher or lower and by how much?

BE 2–7

Adjusting entries

• LO2–5

Prepare the necessary adjusting entries at its year-end of December 31, 2018, for the Jamesway Corporation for each of the following situations. No adjusting entries were recorded during the year.

1. On December 20, 2018, Jamesway received a $4,000 payment from a customer for services to be rendered early in 2019. Service revenue was credited.

2. On December 1, 2018, the company paid a local radio station $2,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited.

3. Employee salaries for the month of December totaling $16,000 will be paid on January 7, 2019.

4. On August 31, 2018, Jamesway borrowed $60,000 from a local bank. A note was signed with principal and 8% interest to be paid on August 31, 2019.