I. | The Rau co: | |||||||
(a) | Ref. | Account titles and explanation | Debit | Credit | ||||
1 | Service revenue | 2800*(2/7) | 800 | |||||
Unearned revenue | 800 | |||||||
(Revenue for Jan and feb 2001 recorded as unearned) | ||||||||
2 | Rent expense | 7200*(10/12) | 6000 | |||||
Prepaid rent | 6000 | |||||||
(Rent expired from Mar 1 to Dec 31-10 monrhs) | ||||||||
3 | Advertising expense | 4500*(2/3) | 3000 | |||||
Advertising payable | 3000 | |||||||
(Advertisng expense payable for 2 months-Nov and Dec) | ||||||||
4 | Unearned subscriptions revenue | (Note:1) | 432 | |||||
Subscriptions revenue | 432 | |||||||
(Subscriptions revenue earned) | ||||||||
5 | Interest expense | (10000*12%*3/12) | 300 | |||||
Interest payable | 300 | |||||||
(Interest due from Oct 1 to Dec 31-3 months) | ||||||||
6 | Depreciation expense | (45000-3000)/10*(6/12) | 2100 | |||||
. | Accumulated depreciation | 2100 | ||||||
(Depreciation recorded) | ||||||||
Note:1 | ||||||||
Received advance in Feb 1,1999 for 3 year (36 months) subscription | ||||||||
Current balance=$900 | ||||||||
This will be after expiration of 11 months (Feb 1999 to Dec 1999). | ||||||||
Hence, the current balance represents advance for 25 months (36-11). | ||||||||
Revenue to be recognized in 2000=900*(12/25)=$ 432 | ||||||||
(b) | Entry (3) and (5) | |||||||
I. | The nixon advertising agency | |||||||
(a) | Date | General journal | Debit | Credit | ||||
Feb 1. | No entry required | |||||||
May 1. | Cash | 30000 | ||||||
Note payable | 30000 | |||||||
(Borrowed from bank) | ||||||||
June 1. | Equipment | 33000 | ||||||
Cash | 33000 | |||||||
(Purchased equipment) | ||||||||
June 12. | Accounts receivable | 6600 | ||||||
Service revenue | 6600 | |||||||
(Billed customers) | ||||||||
June 20. | Cash | (Plug) | 6468 | |||||
Discount allowed | (6600*2%) | 132 | ||||||
Accounts receivable | 6600 | |||||||
(Customers paid) | ||||||||
Aug 1. | Consulting charges | 9000 | ||||||
Cash | 9000 | |||||||
(Consulting charges paid in advance for 6 months) | ||||||||
Oct 1. | Prepaid rent | 36000 | ||||||
Cash | 36000 | |||||||
(Rent paid in advance for 5 months) | ||||||||
Nov 1. | No entry required |
I. The Rau Co. closes its books once a year on Dec. 31. Required: (a) Make...
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