Question

The advertising account of Skype Stores included an amount of R1 200 that was paid for advertising for the period 01 November 2015 to 31 October 2016. Which of the following alternatives represent the correct double entry to record the required adjustment on
29 February 2016, the end of the financial year?

1.7 The following information was extracted from the books of Munster Wholesalers on 30 September 2015:

(1)

	Account debit	Account credit	Amount (R)
A	Accrued expenses	Advertising	R800
B	Prepaid expenses	Advertising	R400
C	Prepaid expenses	Advertising	R800
D	Advertising	Prepaid expenses	R800

1.5 Which of the following accounts increase by means of a debit entry in the ledger?

1. A Vehicles and Stationery

2. B Capital and Investments

3. C Rent income and Loan

4. D Equipment and Creditors control

Answer 1

1.7

Advertising for 12 months period = R1,200

Advertising from November 1, 2015 to February 29, 2016 i.e. for 4 months = 1,200 x 4/12

= R400

Hence, R800 is the prepaid expense on February 29, 2016.

The correct double entry to record the required adjustment on 29 February 2016, will be as under:

Feb. 29, 2016	Prepaid expenses	800
	Advertising		800

Correct option is (C)

1.5

Vehicles and Stationery accounts increase by means of a debit entry in the ledger.

All assets and expenses account increase by means of a debit entry.

Correct option is (A)

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