Question

When the accounts of Skysong Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period. 1. 2. The prepaid insurance account shows a debit of $4,128, representing the cost of a 2-year fire insurance policy dated August 1 of the current year. On November 1, Rent Revenue was credited for $1,965, representing revenue from a subrental for a 3-month period beginning on that date. Purchase of advertising materials for $721 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $274 are on hand. Interest of $725 has accrued on notes payable. The interest will be paid in January of the next year. 3. 4. Prepare the following in general journal form. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter Ofor the amounts.)

Answer 1

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Skysong Inc.
Workings
For adjustment 1	Amount $
Prepaid Insurance	4,128.00
Period (Years)	2.00
Period (Months)	24.00
Insurance expense per month	172.00
Months Expired (Aug to Dec)	5.00
Insurance expense for the current year	860.00
For adjustment 2	Amount $
Rent Revenue	1,965.00
Period (Months)	3.00
Rent Revenue per month	655.00
Months Expired (Nov to Dec)	2.00
Earned Rent for the current year	1,310.00
Unearned Rent for the current year	655.00
For adjustment 3	Amount $
Advertising materials purchased	721.00
Advertising materials in hand	274.00
Advertising materials expense for the current year	447.00

	Journal entry
No.	Account title and explanation	Debit $	Credit $
1	Insurance expense	860.00
	Prepaid Insurance		860.00
2	Rent Revenue	655.00
	Unearned Rent		655.00
3	Advertising materials expense	447.00
	Advertising materials		447.00
4	Interest expense	725.00
	Interest Payable		725.00