Question

In: Accounting

a.)On December 31, 2019, the Notes Receivable account at P. Davis Materials Corporation had a balance...

a.)On December 31, 2019, the Notes Receivable account at P. Davis Materials Corporation had a balance of $12,000, which represented a six-month, 12 percent note received from a customer on October 1.

b. ) During the week ended June 7, 2019, McCormick Media received $32,000 from customers for subscriptions to its magazine Modern Business. On December 31, 2019, an analysis of the Unearned Subscription Revenue account showed that half of the subscriptions were earned in 2019.

C.) On November 1, 2019, Perez Realty Company rented a commercial building to a new tenant and received $43,200 in advance to cover the rent for six months. Upon receipt, the $43,200 was recorded in the Unearned Rent account.

D.) On November 1, 2019, the Mighty Bucks Hockey Club sold season tickets for 40 home games, receiving $3,200,000. Upon receipt, the $3,200,000 was recorded in the Unearned Season Tickets Income account. At December 31, 2019, the Mighty Bucks Hockey Club had played 5 home games.

For each of the above independent situations, indicate the adjusting entry that must be made on the December 31, 2019, worksheet assuming no previous adjusting entries have been made during the year

Expert Solution

Solution:

Transaction a – Notes Receivable

- Note received from customer on October 1

- Adjustment entry would require to record the Interest Revenue for 3 Months (Oct to Dec)

3 Months Interest Income = $12,000 * 12% * 3/12 = $360

No.	Date	General Journal	Debit	Credit
a)	Dec.31	Interest Receivable	$360
		Interest Income		$360
		(To record interest income for 3 months)

Transaction b – Subscription

- Half of the subscription earned during the year must be recorded as Subscription Earned

Date	General Journal	Debit	Credit
Dec.31, 2019	Unearned Subscription Revenue account	$16,000
	Subscription Revenue account (32,000 / 2)		$16,000
	(To record earned subscription during the year)

Transaction c – Unearned Rent

Advance Rent Received on Nov 1, 2019 = $43,200

The Rent revenue for 2 months (Nov and Dec) must be recorded via adjusting entry

Date	General Journal	Debit	Credit
Dec.31, 2019	Unearned Rent Account	$14,400
	Rent Revenue (43,200 / 6 * 2 months)		$14,400
	(To record earned rent revenue for nov and dec)

Transaction d – Unearned Season ticket income

Since the 5 home games are played in the December month, the revenue related to the 5 games must be recorded in Dec.

Date	General Journal	Debit	Credit
Dec.31, 2019	Unearned Season Tickets Income account	$400,000
	Season Ticket Revenue (3,200,000/ 40 * 5)		$400,000
	(To record season ticket revenue related to 5 games played in Dec)

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ekkarill92 answered 2 years ago

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