Concept explainers
a.
Prepare the journal entries by recording the prepayment of expenses in an asset account and prepayment of revenue in a liability account.
a.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Prepare the journal entry to record the advance cash payment of insurance.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 1 | Prepaid insurance | 6,000 | ||
Cash | 6,000 | |||
(To record the journal entry for advance cash payment of insurance) |
Table (1)
- Prepaid insurance is an asset and it is increased. Therefore, debit prepaid insurance with $6,000.
- Cash is an asset and it is decreased. Therefore, credit cash with $6,000.
Prepare the journal entry to record the cash received in advance for services.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 1 | Cash | 2,400 | ||
Unearned revenue | 2,400 | |||
(To record the journal entry for cash received in advance for services) |
Table (2)
- Cash is an asset and it is increased. Therefore, debit cash account with $2,400.
- Unearned revenue is a liability and it is increased. Therefore, credit unearned revenue with $2,400.
Prepare the adjusting entry to record the expiration of insurance expense.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Insurance expense | 6,000 | ||
Prepaid insurance | 6,000 | |||
(To record the adjusting entry for prepaid insurance) |
Table (3)
- Insurance expense is an expense account and it is increased. Therefore, debit insurance expense with $6,000.
- Prepaid insurance is an asset and it is decreased. Therefore, credit prepaid insurance expense with $6,000.
Prepare the adjusting entry to record the service provided.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Unearned revenue | 2,000 | ||
Revenue | 2,000 | |||
(To record the adjusting entry for service provided) |
Table (4)
- Unearned revenue is a liability and it is decreased. Therefore, debit unearned revenue with $2,000.
- Revenue is a revenue account and it is increased. Therefore, credit revenue account with $2,000.
b.
Prepare the journal entries by recording the prepayment of expenses in an expense account and prepayment of revenue in a revenue account.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.
Prepare the journal entry to record the advance cash payment of insurance.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 1 | Insurance expense | 6,000 | ||
Cash | 6,000 | |||
(To record the journal entry for advance cash payment of insurance) |
Table (5)
- Insurance expense is an expense account and it is increased. Therefore, debit insurance expense with $6,000.
- Cash is an asset and it is decreased. Therefore, credit cash with $6,000.
Prepare the journal entry to record the cash received in advance for services.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 1 | Cash | 2,400 | ||
Revenue | 2,400 | |||
(To record the journal entry for cash received in advance for services) |
Table (6)
- Cash is an asset and it is increased. Therefore, debit cash account with $2,400.
- Revenue is a revenue account and it is increased. Therefore, credit revenue account with $2,400.
Prepare the adjusting entry to record the expiration of insurance expense.
- No adjusting entry is required for insurance
Prepare the adjusting entry to record the service provided.
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31 | Revenue | 400 | ||
Unearned Revenue | 400 | |||
(To record the adjusting entry for service provided) |
Table (7)
- Revenue is a revenue account and it is decreased. Therefore, debit revenue account with $400.
- Unearned revenue is a liability and it is increased. Therefore, credit unearned revenue with $400.
Want to see more full solutions like this?
Chapter 3 Solutions
Principles of Financial Accounting.
- Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold was $24,500. Abbey Co. issued a credit memo for $3,600 of undiscounted merchandise returned which originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions? A. $10,500 B. $30,772 C. $7,972 D. $31,400arrow_forwardans plzarrow_forwardWeight average method would bearrow_forward
- Fast Answer @ general Accountarrow_forwardThe 2019 annual report for Anglo-American PLC, the world's leading global mining company, shows that the firm had $41.065 billion in non-current assets and $11.670 billion in current assets. It reported $13.120 billion in current liabilities and $9.442 billion in non-current liabilities. How much was the equity of Anglo-American PLC worth? Tutor, please provide step by step correct solution to this financial accounting problem. ?!arrow_forwardSUBJECT -GENERAL ACCOUNTarrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272124/9781337272124_smallCoverImage.gif)