Prepare the correct journal entries for the following transactions: 12/01 Issued capital stock for $300,000 cash....

Prepare the correct journal entries for the following transactions:

12/01 Issued capital stock for $300,000 cash.

12/03 Received $144,000 for magazine subscriptions to run for two

years from this date. The magazine is published monthly on the

23rd.

12/04 Paid for advertising to be run in a national periodical for six

months (starting this month). The cost was $36,000.

12/ 07 Purchased for cash an insurance policy to cover a two-year

period beginning December 15, $24,000.

12/12 Paid the annual rent on the building, $36,000, effective through

November 30, 2013.

12/15 Received $216,000 cash for two-year subscriptions starting

with the December issue.

Solutions

Expert Solution

Journal entry
Date	Account name	Debit	Credit
12/01	Cash	300000
	Capital stock		300000
	(Being capital stock issued)

12/03	Cash	144000
	Revenue - Magazine		6000
	Un earned revenue		138000
	(Being revenue 144000/24 months = 6000 recognised for the current month, for the subsequent month the entry will be Un earned revenue Debit 6000 Revenue-magzine Credit 6000 till the full amount of revenue gets recognised))

12/04	Advertising expense	6000
	Prepaid expense	30000
	Cash		36000
	(Being advertising expense recognised for the month 36000/6 = 6000)

12/07	Insurance expense	500
	Prepaid insurance	23500
	Cash		24000
	(24000 /24= 1000 , 1000 is for the whole month since the period is beginning from december 15 the expense will be debited for 1/2 months = 500)

12/12	Rent expense	3000
	Prepaid rent	33000
	Cash		36000
	(36000/12 = 3000 for the month of december

12/15	Cash	216000
	Revenue - Magazine		9000
	Un earned revenue		207000
	(216000 / 24 = 9000 revenue recognised for the month)

ekkarill92 answered 1 year ago

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