Question

For each of the following independent situations, prepare journal entries to record the initial transaction on December 31 and the adjustment required on January 31.

a. Magnificent Magazines received $17,400 on December 31, 2015, for subscription services related to magazines that will be published and distributed in January through December 2016.
b. Walker Window Washing paid $1,740 cash for supplies on December 31, 2015. As of January 31, 2016, $290 of these supplies had been used up.
c. Indoor Raceway received $4,350 on December 31, 2015, from race participants for providing services for three races. One race is held in January 31, 2016, and the other two will be held in March 2016.

Answer 1

1 Dec 31

Dr Cash 17,400

Cr Unearned subscription revenue 17,400

2 Jan 31

Dr Unearned subscription revenue 1,450

Cr Subscription revenue 1,450

3 Dec 31

Dr Supplies 1,740

Cr Cash 1,740

4 Jan 31

Dr Supplies expense 290

Cr Supplies 290

5 Dec 31

Dr Cash 4,350

Cr Unearned service revenue 4,350

6 Jan 31

Dr Unearned service revenue 1,450

Cr Service revenue 1,450

Step-by-step explanation:

Preparation of the journal entries to record the initial transaction on December 31 and the adjustment required on January 31.

1 Dec 31

Dr Cash 17,400

Cr Unearned subscription revenue 17,400

2 Jan 31

Dr Unearned subscription revenue 1,450

(17,400/12)

Cr Subscription revenue 1,450

3 Dec 31

Dr Supplies 1,740

Cr Cash 1,740

4 Jan 31

Dr Supplies expense 290

Cr Supplies 290

5 Dec 31

Dr Cash 4,350

Cr Unearned service revenue 4,350

6 Jan 31

Dr Unearned service revenue 1,450

(4,350/3)

Cr Service revenue 1,450