Question

Cantonio Corporation adjusts its accounts only at year-end. The following information is available as a source for preparing adjusting entries at December 31, 2018. For each of the numbered items, prepare the necessary adjusting journal entry.

1. On August 31, 2018, Cantonio paid $12,000 for a two-year insurance policy and Cantonio recognized the entire amount as a debit to prepaid insurance.
2. On September 1, 2018, Cantonio sold 100 one-year subscriptions for their monthly publication at $90 each, with the subscriptions starting September 1. The total amount received was credited to Unearned Subscription Revenue.
3. The Supplies Inventory account had a $15,000 balance at the beginning of the year (January 1, 2018). During the year, $7,000 of supplies were acquired, with the Supplies Expense account debited at the time of purchase. The supplies count at the end of the year (December 31, 2018) showed $17,000 of supplies still on hand.
4. The company failed to recognize $4,000 in rent owed to them by another company that rents a part of Cantonio’s building.

Answer 1

Adjusting entries

Date	account and explanation	Debit	credit
Dec 31,2018	Insurance expense (12000/24*4)	2000
	Prepaid insurance		2000
	(To record insurance expense)
Dec 31,2018	Unearned subscription revenue (100*90/12*4)	3000
	Subscription Revenue		3000
	(To record revenue)
Dec 31,2018	Supplies (15000+7000-17000)-7000	2000
	Supplies expense		2000
	(To record supplies expense)
Dec 31,2018	Account receivable	4000
	Rent revenue		4000
	(To record rent revenue)