In: Accounting
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.
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) |