Question

Unearned Rent Revenue $451,590. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.

Date Term(in months) Monthly rent # of leases
Nov1 6 6,000 5
Dec1 6 8,500 4

Preapaid advertising 13,200. This balance consists of payments ontwo advertising contracts. The contracts provide for monthlyadvertising in two trade magazines. The terms of the contracts are asshown below.

contract date amount # of magazines issues
A650 May 1 6,000 12
B974 Oct 1 7,200 24

Notes payable 60,000. This balance consists of a note for one year a tan annual interest rate of 12% dated June 1.

Required:
Journalize the entries.

Answer 1

November 1, 202x, rented office space for 5 months.

Dr Cash 30,000

Cr Unearned revenue 30,000

November 30, 202x, accrued rental revenue

Dr Unearned revenue 6,000

Cr Rent revenue 6,000

December 1, 202x, rented office space for 4 months

Dr Cash 34,000

Cr Unearned revenue 34,000

December 31, 202x, accrued rental revenue

Dr Unearned revenue 14,500

Cr Rent revenue 14,500

May 1, 202x, prepaid advertising expense

Dr Prepaid advertising 72,000

Cr Cash 72,000

May 31, 202x, accrued advertising expense

Dr Advertising expense 6,000

Cr Prepaid advertising 6,000

*A similar journal entry must be done in order to adjust accrued advertising expense at the end of each month.

October 1, 202x, prepaid advertising expense

Dr Prepaid advertising 172,800

Cr Cash 172,800

October 31, 202x, accrued advertising expense

Dr Advertising expense 7,200

Cr Prepaid advertising 7,200

*A similar journal entry must be done in order to adjust accrued advertising expense at the end of each month.

June 1, 202x, notes payable

Dr Cash (Accounts payable?, merchandise?, equipment?) 60,000

Cr Notes payable 60,000

December 31, 202x, accrued interest expense (seven months)

Dr Interest expense 4,200

Cr Interest payable 4,200