Question

Consider the following situations for Shocker:

a. On November 28, 2018, Shocker receives a $4,500 payment from a customer for services to be rendered evenly over
the next three months. Deferred Revenue is credited.
b. On December 1, 2018, the company pays a local radio station $2,700 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.
c. Employee salaries for the month of December totaling $8,000 will be paid on January 7, 2019.
d. On August 31, 2018, Shocker borrows $70,000 from a local bank. A note is signed with principal and 9% interest to be
paid on August 31, 2019.
Required:
Record the necessary adjusting entries for Shocker at December 31, 2018. No adjusting entries were made during the year

Answer 1

Step-by-step explanation:

1. 28/11 Debit: Bank. $4,500

Credit: deferred Rev $4,500

Being advance pmt for services

2. 01/12 Debit: advert exp $900

Debit: Ad Prepaym. $1,800

Credit: Bank. $2,700

Being payment for advert

3. 31/12 Debit: Salary payable$8000

Credit: Salary Exp. $8000

Being Accrued salaries

4 31/08 Debit: Bank. $70,000

Credit: Loan A/c. $70,000

Being bank loan borrowed

5. 31/12 Debit: into on loan $2,100

Credit: Bank. $2,100

Being accrued interest on loan borrowed.

Answer 2

1. GENERAL JOURNAL

ACCOUNT TITLE DEBIT CREDIT

DEC 31,2018

a Deferred Revenue 1,500

Service Revenue 1500

b Advertising Expense 900

Prepaid Advertising 900

c Salaries Expense 8000

Salaries Payable 8000

d. Interest Expense 2100

interest Payable 2100

(to adjust for accrued interest expense)

2 a,$1500 for the next three months

b.$900

c.Salaries Expense will be recorded as accrual, so there wont be any computation

d.I=$2100

Step-by-step explanation:

GENERAL JOURNAL

ACCOUNT TITLE DEBIT CREDIT

DEC 31,2018

a Deferred Revenue 1,500

Service Revenue 1500

b Advertising Expense 900

Prepaid Advertising 900

c Salaries Expense 8000

Salaries Payable 8000

d. Interest Expense 2100

interest Payable 2100

(to adjust for accrued interest expense)

2. Service Revenue is credited and the deferred revue is on the debit side

therefore

$4500*1/3

=$1500 for the next three months

b. one-third of advertisement(10/30) has been aired. Advertising expenses is debited while prepaid advertising is credited

$2700*10/30

$900

c.Salaries Expense will be recorded as accrual, so there wont be any computation

d.Interest for four month from September 1 to December 31

I=principal *rate *time

I=70000*9%*4/12

I=$2100