QS 3-19A Preparing adjusting entries LO P4

Garcia Company had the following selected transactions during the year.

Jan.		1		The company paid $6,600 cash for 12 months of insurance coverage beginning immediately for the calendar year.
May		1		The company received $3,300 cash in advance for 6 months of contracted services commencing on May 1 and concluding on October 31.
Dec.		31		The company prepared any necessary year-end adjusting entries related to insurance coverage and services rendered.

a. Record journal entries for these transactions assuming Garcia follows the usual practice of recording a prepayment of an expense in an asset account and recording a prepayment of revenue received in a liability account.

b. Record journal entries for these transactions assuming Garcia follows the alternative practice of recording a prepayment of an expense in an expense account and recording a prepayment of revenue received in a revenue account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

QS 3-10 Unearned (deferred) revenues adjustments LO P1

Record adjusting journal entries for each of the following for year ended December 31.

Assume no other adjusting entries are made during the year.

Unearned Rent Revenue. The Krug Company collected $17,400 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months rent in advance and occupancy began November 1.

Unearned Services Revenue. The company charges $170 per month to spray a house for insects. A customer paid $680 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied three treatments for the customer.

Unearned Rent Revenue. On September 1, a client paid the company $46,800 cash for six months of rent in advance (the client leased a building and took occupancy immediately). The company recorded the cash as Unearned Rent Revenue.

QS 3-11 Adjusting for unearned revenues LO P1

For each separate case below, follow the three-step process for adjusting the unearned revenue liability account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year.

a. Tao Co. receives $10,500 cash in advance for four months of legal services on October 1, 2017, and records it by debiting Cash and crediting Unearned Revenue both for $10,500. It is now December 31, 2017, and Tao has provided legal services as planned. What adjusting entry should Tao make to account for the work performed from October 1 through December 31, 2017?

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

b. A. Caden started a new publication called Contest News. Its subscribers pay $31 to receive 12 monthly issues. With every new subscriber, Caden debits Cash and credits Unearned Subscription Revenue for the amounts received. The company has 100 new subscribers as of July 1, 2017. It sends Contest News to each of these subscribers every month from July through December. Assume no changes in subscribers, prepare the journal entry that Caden must make as of December 31, 2017, to adjust the Subscription Revenue account and the Unearned Subscription Revenue account.

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.