Question

Tamarisk Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2022.

1. Purchased a 1-year insurance policy on June 1 for $1,980 cash.
2. Paid $6,760 on August 31 for 5 months’ rent in advance.
3. On September 4, received $3,780 cash in advance from a corporation to sponsor a game each month for a total of 9 months for the most improved students at a local school.
4. Signed a contract for cleaning services starting December 1 for $1,040 per month. Paid for the first 2 months on November 30. (Hint: Use the account Prepaid Cleaning to record prepayments.)
5. On December 5, received $1,560 in advance from a gaming club. Determined that on December 31, $495 of these games had not yet been played.
For each of the above transactions, prepare the adjusting journal entry that is required on December 31.

Answer 1

Adjusting Journal Entry on December 31, 2021

S/N Accounts&Explanation Debit Credit

1. Insurance Expenses $1,155

($1,980*7/12)

Prepaid Insurance $1,155

2. Rent Expenses $5,408

($6,760*4/5)

Prepaid rent $5,408

3. Unearned service revenue $1,680

($3,780 *4/9)

Service revenue $1,680

4. Maintenance&repair Exp. $1,040

($2,080*1/2)

Prepaid cleaning $1,040

5. Unearned service earned $1,065

($1,560-$495)

Service earned $1,065