Question

M4-6 Recording Adjusting Journal Entries [LO 4-2] For each of the following transactions for the Sky Blue Corporation, prepare the adjusting journal entries required on October 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

a. Collected $3,300 rent for the period October 1 to December 31, which was credited to Unearned Revenue on October 1.

b. Paid $1,920 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount.

c. Used a machine purchased on October 1 for $51,600. The company estimates annual depreciation of $5,160.

Answer 1

Adjusting journal entries on October 31:
No.	Date	General Journal	Debit	Credit
a.	October 31	Unearned revenue	$       1,100
		Revenue		$       1,100
		(To record revenue earned)
	Working:
	Monthly Revenue		=	$ 3300 x 1/3		=	$       1,100
b.	October 31	Insurance Expense	$ 80
		Prepaid Insurance		$ 80
		(To record insurance expense for October)
		Total premium paid		$       1,920
		Period covered		24
		Monthly Insurance		$ 80
c.	October 31	Depreciation Expense	$ 430
		Accumulated Depreciation		$ 430
		(To record depreciation expense for October)
		Annual Depreciation	$       5,160
		Monthly Depreciation	$       5,160	/	12	=	$           430