Question

When the accounts of Metlock Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.

1. The prepaid insurance account shows a debit of $6,288, representing the cost of a 2-year fire insurance policy dated August 1 of the current year.

2. On November 1, Rent Revenue was credited for $1,662, representing revenue from a subrental for a 3-month period beginning on that date.

3. Purchase of advertising materials for $730 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $308 are on hand. 4. Interest of $722 has accrued on notes payable.

Prepare the following in general journal form. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) (a) The adjusting entry for each item. No. Account Titles and Explanation Debit Credit

1. enter an account title for the adjusting entry I enter a debit amount enter a credit amount enter an account title for the adjusting entry enter a debit amount enter a credit amount

2. enter an account title for the adjusting entry enter a debit amount enter a credit amount enter an account title for the adjusting entry enter a debit amount enter a credit amount

3. enter an account title for the adjusting entry enter a debit amount enter a credit amount enter an account title for the adjusting entry enter a debit amount enter a credit amount

4. enter an account title for the adjusting entry enter a debit amount enter a credit amount enter an account title for the adjusting entry enter a debit amount enter a credit amount

(b) The reversing entry for each item where appropriate. No. Account Titles and Explanation Debit Credit

1. enter an account title for the reversing entry enter a debit amount enter a credit amount enter an account title for the reversing entry enter a debit amount enter a credit amount

2. enter an account title for the reversing entry enter a debit amount enter a credit amount enter an account title for the reversing entry enter a debit amount enter a credit amount

3. enter an account title for the reversing entry enter a debit amount enter a credit amount enter an account title for the reversing entry enter a debit amount enter a credit amount

4. enter an account title for the reversing entry enter a debit amount enter a credit amount enter an account title for the reversing entry enter a debit amount enter a credit amount

Answer 1

Ans.

Adjusting entries

• S.no	Accounts title and description	Debit($)	Credit($)
  1	Insurance expenses (6288/24*5) Prepaid insurance (being prepaid insurance adjustment entry recorded)	1310	1310
  2	Rental revenue(1662/3) Deferred rental revenue (Being rent revenue 3 months adjusting entry recorded)	554	554
  3	Advertising materials inventory Advertising expense (Being advertising material are in hand recorded)	308	308
  4	Interest receivable Interest revenue (being interest of $722 accrued on notes payable recorded)	722	722

  2. Reversal entry wherever required

  S.no	Account title and description	Debit	Credit
  1	No reversal entry required
  2	Deferred rental revenue Rental revenue (Being reversal entry in next year recorded)	554	554
  3	Advertising expense Advertising material inventories (Being reversal entry recorded)	308	308
  4	No reversal entry required