Question

Sheridan 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, 2020 for $23,000.
2. Rent of $16,800 for six months for a portion of the building was received on November 1, 2020

Answer 1

April, 1

DR Prepaid Insurance .............................................................$23,000

CR Cash ........................................................................................................$23,000

Dec, 31

DR Insurance Expense.............................................................$8,625

CR Prepaid Insurance................................................................................$8,625

Working

Insurance expense;

April to December = 9 months

= 23,000 * 9/24 months

= $8,625

Nov, 1

DR Cash ......................................................................................$16,800

CR Deferred rent revenue .....................................................................$16,800

Dec, 31

DR Deferred rent revenue ...................................................$5,600

CR Rent Revenue......................................................................................$5,600

Working

= 16,800 * 2/6 months

= $5,600