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In: Accounting

Scene Productions Inc. set up its operations on December 15 of the current year and chose...

Scene Productions Inc. set up its operations on December 15 of the current year and chose a December 31 year-end for ease in future years. Prepare the required journal entries and adjusting entries for the following items:

a. A one-year insurance policy was purchased on December 15 for $2,280. Supplies totalling $1,652 were purchased on December 15.

b. A $1,500 three-month advertising contract was signed and paid for on December 15.

c. Supplies totalling $48 were used in December.

Solutions

Expert Solution

Journal entries:

When insurance policy was purchased for year, it is recorded as prepaid insurance. Therefore, prepaid insurance is debited and cash is credited.

When supplies are purchased, supplies account is debited and cash is credited.
When cash is paid for 3 month advertising contract, it is recorded as prepaid advertising. Therefore, prepaid advertising is debited and cash is credited.


Adjusting entries:

On December 31, end of the year, adjusting entries are needed for 15 days (half a month).

Prepaid insurance policy was expired for half a month. An adjusting entry is recorded by debiting Insurance expense and crediting prepaid insurance. The amount is ($2,280 ÷ 12) × 1/2 = $95.

Supplies of $48 were used in December. Therefore, an adjusting entry is needed to write off the supplies used. Supplies expense is debited and supplies is credited for $48.
Prepaid advertising was expired for half a month. Therefore, an adjusting entry is needed on December 31. Advertising expense is debited and prepaid advertising is credited. The amount is ($1,500 ÷ 3) × 1/2 = $250

ekkarill92 answered 1 year ago
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