Question

Consider the following situations for Shocker:

A. On November 28, 2018, Shocker receives a $3,750 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 $2,550 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 $7,500 will be paid on January 7, 2016.
D. On August 31, 2018, Shocker borrows $65,000 from a local bank. A note is signed with principal and 6% interest to be paid on August 31, 2019.
Required:
Record the necessary adjusting entries for Shocker at December 31, 2018.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. Deferred revenue Dr ($3,750 ÷ 3 months) $1,250

To Revenue $1,250

(Being the revenue of three month is recorded)

b. Advertising expense Dr ($2,550 × 10 ÷ 30) $850

To Prepaid advertise $850

(Being the advertising expense is recorded)

c. Salary expense Dr $7,500

To Outsanding salary $7,500

(Being the salary expense is recorded)

d. Interest expense Dr ($65,000 × 6% × 4 months ÷ 12 months) $1,300

To Accrued interest $1,300

(being the interest expense is recorded)

The four months is taken from August 31 to December 31