Question

The Silver Legal Services Company made a payment of $18,000 as an advanced payment for one year of advertising on October 31. Silver's year-end is December 31st. If they company recorded the original transaction with a debit to Prepaid Advertising account on October 31, the adjusting entry on December 31 should: Debit what account? (Select] Credit what account? Select] Be for what dollar amount? $ [Select] If they company recorded the original transaction with a debit to Advertising Expense account on October 31, the adjusting entry on December 31 should: Debit what account? Select] Credit what account? [Select] Be for what dollar amount? $ [Select]

Answer 1

Solution

An adjusting journal entry is an entry in a company's general ledger that occurs at the end of an accounting period to record any unrecognized income or expenses for the period. The most common types of adjusting journal entries are accrued expenses, accrued revenues, unearned revenues, prepaid expenses, and depreciation.

1) Adjusting entry of prepaid advertising on December 31st

Debit - Advertising expense account

Credit - Prepaid advertising account

Dollar amount - $18000