Summer Sports Magazine sold advertising space to a customer. On November 1, 2013

Question

Summer Sports Magazine sold advertising space to a customer. On November 1, 2013 the customer paid Summer Sports Magazine $5,000 for five ads, with one ad to run each month starting in November 2013 and finishing in March 2014. The $5,000 was recorded to Unearned Revenue when it was received. Summer Sports Magazine has run both the November and December 2013 ads by December 31, 2013 ads by December 31, 2013. Assuming no adjusting entries had been made yet this fiscal year, prepare the adjusting entry necessary for December 31, 2013. SHOW CALCULATIONS Jordan River Company purchased a two-year fire and extended coverage insurance policy on August 1, 2014, and charged the $5400 premium to Insurance Expense. Assuming no adjusting entries had been made yet this year, prepare the adjusting entry necessary at December 31, 2014. SHOW CALCULATIONS. Alta Maid Service purchased $15,300 of cleaning supplies during 2014, recording the purchase as an asset. The Supplies account had a $3,500 balance on 1/1/14. A count of supplies at year-end found that $4,000 of cleaning supplies were on hand at 12/31/14. Assuming no other entries were made to the Supplies account during 2014, make the adjusting entry to reflect supplies used in 2014. SHOW CALCULATION

Explanation / Answer

42. Revenue that is to be recognised each month = 5,000 / 5 = $1,000

For 2 months of 2013 = 1000 x 2 = $2,000

Adjusting Entry for Revenue of November and December:

43. Total Premium for 2 Years policy = $5,400

Monthly Premium = 5,400 / 24 = $225

For 5 months of 2014 = 225 x 5 = $1,125

Prepaid Premium = 5,400 - 1,125 = $4,275

Adjusting Entry for Prepaid Insurance in 2014:

44. Opening balance of Supplies = $3,500

Add: Purchase during the Year = 15,300

Total Supplies available = 18,800

Less: Ending Balance = 4,000

Supplies consumed During the Year = 14,800

Adjusting Entry:

Date Account Title Debit Credit 31 Dec. 2013 Unearned Revenue 2,000 Revenue 2,000 (Recording of revenue for November and December)

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