The Todd Co. paid for a 12-month insurance $1,800. The original entry recorded t

Question

The Todd Co. paid for a 12-month insurance $1,800. The original entry recorded t should be made on December 31, 20187 1. he payment in the advance on Sepnesber 1,2018 in the u 1,200 3600 $1.200 Prepaid Insurance d. Prepaid Insurance Insurance Expense 5600 $1.200 5600 2. Joker Co. is a consulting firm. On October 1, 2018, Joker received an advance payment of $20,000 o consulting services to be performed over the next four months and credited the account Unearned Service Revenue. Assuming the services are performed evenly over the four months, what ndjusting yourmal estry needs to be made at December 31, 20181 a. Cash b. Unearned Service Revenue c. Cash d. Unearned Service Revenue Service Revenue Service Revenue Service Revenue Service Revenue $15,000 $15,000 $20,000 $5,000 $15,000 S15,000 $5,000 3. Brooks Co. borrowed $1,000,000 from the bank on September 1,2018. The terms of the note payable are as follows: Interest rate: 6% annual rate Payment terms: principal and interest due March 1, 2019 What entry should Brooks Co. make at December 31, 2018? a. Interest Expense b. Interest Payable c. Interest Expense d. Interest Expense $15,000 $15,000 Interest Payable Interest Expense Interest Payable Interest Payable $20,000 $20,000 $30,000 $30,000 6 years. Assuming the amount of depreciation expense for the full year 2018 is $7,500, what is the amount of accumulated depreciation on December 31, 2018? 4. Smith Co. purchased a piece of equipment on July 1, 2017 for $45,000 and the useful life of the equipment is a. Accum. Depr. $11,250 b. Accum. Depr.$7,500. c. Accum. Depr. $3,750 d. Accum. Depr. $15,000.

Explanation / Answer

Answer

--12 months insurance amount = $ 1,800

--Paid on 1 Sept 2018

--Period from 1 Sept to 31 Dec = 4 months

--Insurance expired = $ 1,800 x 4 months/12 months = $ 600

--Insurance expense to be recorded by the amount of $ 600 by debiting Insurance expense and crediting Prepaid Insurance

--Hence, correct answer = Option ‘B’

--Amount received as advance $ 20,000 for 4 months.

--received on 1 Oct 2018

--No. of months from 1 Oct to 31 Dec = 3 months.

--Amount of revenue earned = $ 20,000 x 3 months/4months = $ 15,000

--Unearned Revenue to be debited by this amount and Service revenue to be credited by this amount.

---Hence, correct answer = Option ‘B’

--Note Payable amount = $ 1,000,000

--Annual Interest rate = 6%

--Annual Interest expense = $ 1,000,000 x 6% = $ 60,000

--No. of months from 1 Sept to 31 Dec = 4 months

--Amount of Interest expense to be recorded= $ 60,000 x 4 months/12months = $ 20,000

--Interest expense to be debited by this amount and Interest Payable is to be credited.

--Hence, correct Answer = Option ‘C’

--Full year depreciation for 2018 = $ 7,500 (12 months)

--No. of months equipment existed in 2017 = 1 Jul to 31 Dec = 6 months

--2017 Depreciation expense = $ 7,500 x 6months / 12months = $ 3,750

--Accumulated Depreciation on Dec 31, 2018 = 3750 + 7500 = $ 11,250

--Correct Answer = Option ‘A’: $ 11,250

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