Question

On February 1, Risa Inc. purchases a one year Amazon Prime membership for $120 Cash.

Prepare the adjusting journal entry Risa should record on February 29 related to this transaction.

DR: Cash, Expense, Prepaid Expense, or Accrued Expense (Amount: 120,10)

CR: Cash, Expense, Prepaid Expense, or Accrued Expense (Amount: 120,10)

Answer 1

SOLUTION :
	Adjusting Entry for the service performed is as below,
		Prime membership is purchased for	$                         120
		Paid Cash	$                         120
		Service is taken for	12 Month
		Service completed as on February 29	1 Month
		Value of Service for one month = $ 120 / 12 Month =	$                           10	Per Month
	So one months expenses is recorded as expenses and credited to prepaid expenses
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	February.29	Expenses	$                           10
		Prepaid Expenses		$                         10
		(To Record the expenses of Prime membership)