Question

Fortress Company paid $1200 on October 1, 2009 for one year of virus protection. The following journal entry was made:

10/1/09 Prepaid Software Service 1,200

Cash 1,200

The December 31, 2009 adjusting entry is

A.
debit Prepaid Software Service and credit Software Service Expense. $900

B.
debit Software Service Expense and credit Prepaid Software Service, $300.

C.
debit Software Service Expense and credit Prepaid Software Service, $900.

D.
debit Prepaid Software Service and credit Software Service Expense, $300.

rchased equipment on credit. Which of the following describes the effect of the transaction on the elements of the accounting equation.

A.
it decreases total assets but not stockholders’ equity

B.
it decreases total assets and stockholders’ equity

C.
it increases total assets and stockholders’ equity

D.
it increases total assets but not stockholders’ equity

Answer 1

B. debit Software Service Expense and credit Prepaid Software Service, $300.

D. it increases total assets but not stockholders’ equity

Step-by-step explanation:

The adjusting entry is as follows

Software Service Expense Dr $300

To Prepaid Software Service $300

(Being the software service expense is recorded)

It is computed below:

= $1,200 ÷ 12 months × 3 months

= $300

The three month is calculated from October 1 to December 31

In the second case, the equipment is purchased on credit

The journal entry is

Equipment Dr XXXXX

To Account payable XXXXX

(Being the equipment purchase on account is recorded)

Since the equipment is purchased so we debited the equipment account as the asset is increased and credited the account payable as the liabilities is also increased but there is no impact on the stockholder equity