Question

Please consider the following 4 scenarios:

(1) Flash requires new customers to pay in advance for services and at the time the cash is collected, and recorded Flash also increases the New Customer Advance account (a/c #13 above).  During 2019, Flash collected advance payments from new customers totaling $9,000 and performed $5,000 of services (related to these customer prepayments). Flash anticipates providing the remaining $4,000 of services in early 2020.

(2) Regarding $9,745 of advance payments for insurance coverage: (i) $7,785 was paid in late 2018 for an 18- month general business insurance policy effective January 1, 2019 and (ii) $1,960 was paid in August 2019 for a seven-month automobile insurance policy effective Sept. 1, 2019. 

(3) Regarding $17,800 of advance payments for advertising:  (i) $4,050 for a billboard with a 9-month contract (July 1, 2019- March 31, 2020) and (ii) $13,750 for 55, 30-second radio ads on the local radio station.  As of 12/31/2019, 28 of the radio ads had been broadcast while 27 were scheduled to play in 2020.

(4) On January 2, 2020 Flash paid the company’s landlord, LMN Rentals $3,000 for the December rent.

Consider the adjusting entries resulting from the 4 scenarios listed above and select the answer below that shows the number of entries that would be considered an adjustment of an existing deferred revenue or an adjustment of a deferred expense.