Question

In: Accounting

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)

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