Principles of Financial Accounting.
24th Edition
ISBN: 9781260158625
Author: Wild
Publisher: MCG
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Question
Chapter 3, Problem 21QS
a.
To determine
Prepare the journal entries by recording the prepayment of expenses in an asset account and prepayment of revenue in a liability account.
a.
Expert Solution
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 $2,000.
b.
To determine
Prepare the journal entries by recording the prepayment of expenses in an expense account and prepayment of revenue in a revenue account.
b.
Expert Solution
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.
Prepare the journal entry to record the advance cash payment of insurance.
| Date | Accounts title and explanation | Post Ref. |
Debit ($) |
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.
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Chapter 3 Solutions
Principles of Financial Accounting.
Ch. 3 - Prob. 1MCQCh. 3 - Prob. 2MCQCh. 3 - Prob. 3MCQCh. 3 - Prob. 4MCQCh. 3 - Prob. 5MCQCh. 3 - What is the difference between the cash basis and...Ch. 3 - Prob. 2DQCh. 3 - What type of business is most likely to select a...Ch. 3 - What is a prepaid expense and where is it reported...Ch. 3 - What type of assets requires adjusting entries to...
Ch. 3 - What contra account is used when recording and...Ch. 3 - Prob. 7DQCh. 3 - If a company initially records prepaid expenses...Ch. 3 - Prob. 9DQCh. 3 - Prob. 10DQCh. 3 - Samsung Assume Samsung has unearned revenue. What...Ch. 3 - Prob. 12DQCh. 3 - Question: QUICK STUDY Periodic reporting C1 Choose...Ch. 3 - Prob. 2QSCh. 3 - Identifying accounting adjustments Classify the...Ch. 3 - Prob. 4QSCh. 3 - Prepaid (deferred) expenses adjustments For each...Ch. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Accrued expenses adjustments For each separate...Ch. 3 - Prob. 13QSCh. 3 - Accrued revenues adjustments For each separate...Ch. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Preparing an adjusted trial balance P5 Following...Ch. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - Prob. 21QSCh. 3 - Prob. 22QSCh. 3 - Prob. 1ECh. 3 - Classifying adjusting entries P1 P2 P3 P4 In the...Ch. 3 - Question: Adjusting and paying accrued wages P3...Ch. 3 - Question: Determining cost flows through accounts...Ch. 3 - Prob. 5ECh. 3 - Preparing adjusting entries P1 P2 P3 Prepare...Ch. 3 - Prob. 7ECh. 3 - Analyzing and preparing adjusting entries P5...Ch. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Question: Computing and interpreting profit margin...Ch. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Preparing adjusting entries P1 P2 P3 P4 For each...Ch. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 1BPCh. 3 - Prob. 2BPCh. 3 - Prob. 3BPCh. 3 - Prob. 4BPCh. 3 - Prob. 5BPCh. 3 - Question: SERIAL PROBLEM Business Solutions P1 P2...Ch. 3 - Prob. 1AACh. 3 - Prob. 2AACh. 3 - Prob. 3AACh. 3 - Question: TAKING IT TO THE NET A1 Access EDGAR...
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