A firm purchased a four-year insurance policy for $8,640 on July 1, 2019. The $8,640 was debited to the Prepaid Insuranceaccount.

2. On December 1, 2019, a firm signed a contract with a local radio station for advertising that will extend over a three-year period. The firm paid $42,480 in advance and debited the amount to Prepaid Advertising.

Prepare end-of-month adjusting entries for each of the above situations.

Question

Moocher

Business

13 July, 19:52

A firm purchased a four-year insurance policy for $8,640 on July 1, 2019. The $8,640 was debited to the Prepaid Insuranceaccount.

2. On December 1, 2019, a firm signed a contract with a local radio station for advertising that will extend over a three-year period. The firm paid $42,480 in advance and debited the amount to Prepaid Advertising.

Prepare end-of-month adjusting entries for each of the above situations.

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Answers (1)

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Madisyn Hester · Answer 1

insurance expense 1,080 debit

prepaid insurance 1,080 credit

advertizing expense 1,190 debit

prepaid advertising 1,190 credit

Explanation:

We need to do the adjusting entries for December 31th 2019

solving for expired insurnace from July 1st to Dec 31th

8,640 x 6 / 48 months = 1,080

solving for accrued advertize from Dec 1st to Dec 31th

42,840 x 1/36 = 1,190