Park Sales and Service completed the following transactions during 2014:
Aug. 31 Paid $15,000 store rent covering the six-month period ending February 28, 2015.
Dec. 1 Collected $6,400 cash in advance from customers. The service revenue earned will be $1,600 each month over the four-month period ending March 31, 2015.
Required
1. Journalize these entries by debiting an asset account for Prepaid Rent and by crediting a liability account for Unearned Service Revenue. Explanations are not required.
2. Journalize the related adjustments at December 31, 2014.
3. Post the entries to T-accounts, and show their balances at December 31, 2014. Posting references are not required.
4. Repeat Requirements 1 through 3. This time debit Rent Expense for the rent payment and credit Service Revenue for the collection of revenue in advance.
5. Compare the account balances in Requirements 3 and 4. They should be equal.