I\'ll rate answers both questions On November 15, Great Designs Company purchase

Question

I'll rate answers both questions

On November 15, Great Designs Company purchased an advertising campaign for the month of December. Great Designs paid cash of $2,700 in advance. The advertising campaign ran in December and was completed on December 31.

a. Prepare all necessary journal entries for the advertising campaign for November and December.

b. Explain why you prepared this/these journal entries.

Under the , the expense should be recorded in the month of . Thus, the November journal creates an and the December 31 entry recognizes an .

2. For the year ending December 31, Beard Clinical Supplies Co. mistakenly omitted adjusting entries for (1) $8,300 of unearned revenue that was earned, (2) earned revenue that was not billed of $9,580, and (3) accrued wages of $5,630. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income.

(a) Revenues were __ by $.

(b) Expenses were __ by $.

(c) Net income was __ by $

Explanation / Answer

PART-1)

Solution:

1) Journal entries:

Nov- 15 Dr. Prepaid Advertising $2,700

Cr. Cash $2,700

Dec-31 Dr. Advertising Expense $2,700

Cr. Prepaid Advertising $2,700

2) The expense needs to be recorded in the m/o December when the advertising campaign ran. The November journal entry will creates Prepaid Advertising and December entry indicates the recognizton of the advertising expense and eliminates the prepaid asset

?

PART-2)

(a) revenues was understated by 17,880 (=8,300 + 9,580)

(b) expenses was understated by $5,630

(c) net income was understated by $12,250 (=17,880 - 5,630)

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