The following are selected transactions of the Kimball Publishing Company during
ID: 2506975 • Letter: T
Question
The following are selected transactions of the Kimball Publishing Company during the year 20X5:
Apr. 1 Received $18,900 representing rent in advance for the use of extra office space for the period April 1, 20X5 to March 31, 20X6.
May 25 Paid $12,000 for services of an advertising company for one year beginning June 1, 20X5.
Aug. 31 Paid a $2,700 premium for a two-year fire insurance policy beginning on September 1, 20X5.
Dec. 31 55% of $120,000 collected for magazine subscriptions during 20X5 apply to the years 20X6 and 20X7.
Required: As of December 31, 20X5, provide the appropriate adjusting journal entries assuming:
(1) transactions were originally recorded in asset and liability accounts. Be sure to label your work!!! (Hint: It may be helpful to note the original journal entry made by the company before preparing the adjusting entry.)
(2) transactions were originally recorded in revenue and expense accounts.
Explanation / Answer
(1) transactions were originally recorded in asset and liability accounts. Be sure to label your work!!! (Hint: It may be helpful to note the original journal entry made by the company before preparing the adjusting entry.)
Apr. 1 Received $18,900 representing rent in advance for the use of extra office space for the period April 1, 20X5 to March 31, 20X6. 18,900/12*9 = 14175
Debit: Unearned rent revenue 14175
Credit: Rent revenue 14175
May 25 Paid $12,000 for services of an advertising company for one year beginning June 1, 20X5. 12,000/12 * 7 = 7,000
Debit: Advertising expense 7,000
Credit: Prepaid advertising 7,000
Aug. 31 Paid a $2,700 premium for a two-year fire insurance policy beginning on September 1, 20X5. 2,700/24 * 4 = 450
Debit: Insurance expense 450
Credit: Prepaid insurance 450
Dec. 31 55% of $120,000 collected for magazine subscriptions during 20X5 apply to the years 20X6 and 20X7. 120.000*.45 = 54,000
Debit: Unearned revenue 54,000
Credit: Revenue 54,000
(2) transactions were originally recorded in revenue and expense accounts.
Apr. 1 Received $18,900 representing rent in advance for the use of extra office space for the period April 1, 20X5 to March 31, 20X6. 18,900/12*3 = 4725
Debit: Rent Revenue 4725
Credit: Unearned rent revenue 4725
May 25 Paid $12,000 for services of an advertising company for one year beginning June 1, 20X5. 12,000/12*5 = 5000
Debit: Prepaid advertising 5,000
Credit: Advertising expense 5,000
Aug. 31 Paid a $2,700 premium for a two-year fire insurance policy beginning on September 1, 20X5. 2,700/24*20 = 2250
Debit: Prepaid insurance 2250
Credit: Insurance expense 2250
Dec. 31 55% of $120,000 collected for magazine subscriptions during 20X5 apply to the years 20X6 and 20X7. 120,000*.55 = 66,000
Debit: revenue 66,000
Credit: unearned revenue 66,000
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