Question

Lvanhoe Co. wishes to enter receipts and payments in such a manner that adjustments at the end of the period will not require reversing entries at the beginning of the next period. Record the following transactions in the indicated manner and give the adjusting entry on December 31, 2020. (Two entries for each part.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

1. An insurance policy for two years was acquired on April 1, 2010 for $8,000.2. Rent of $12,000 for six months for a portion of the building was received on November 1, 2020.

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. On Apr 1

Prepaid insurance $8,000

To Cash $8,000

(Being the cash paid is recorded)

For recording this we debited the prepaid insurance as it increased the assets and credited the cash as it decreased the assets

Insurance expense ($8,000 × 9 months ÷ 24 months) $3,000

To Prepaid insurance $3,000

(Being the insurance expense is recorded)

For recording this we debited the insurance expense as it increased the expenses and credited the prepaid insurance as it decreased the assets

We should considered April 1 2020 instead of April 1 2010

2. On Nov 1

Cash $12,000

To Deferred rent revenue $12,000

(Being cash receipt is recorded)

For recording this we debited the cash as it increased the assets and credited the deferred rent revenue as it increased the liabilities

Deferred rent revenue ($12,000 × 2 months ÷ 6 months) $4,000

To Rent revenue $4,000

(Being rent revenue is recorded)

For recording this we debited the deferred rent revenue as it decreased the liabilities and credited the rent revenue as it increased the revenue