P3A44B similar to Speedy Packn Mail completed the following

P3A-44B (similar to) Speedy Pack\'n Mail completed the following transactions during 2016: Requirements xpenses and credits a liability account for uneamed revenues. 1. Joumalize the transactions assuming that Speedy debits an asset account for prepaid expenses and credits a liability account for unearned revenues. Journalize the related adjusting entries at December 31, 2016. Post the journal and adjusting entries to the T-accounts, and show their balances at December 31, 2016. (Ignore the Cash account.) Repeat Requirements 1-3. This time debit an expense account for prepaid expenses and credit a revenue account for unearned revenues Compare the account balances in Requirements 3 and 4. They should be equal. 2. 3. 4. 5. Print Done Nov. 1Paid $7,200 store rent covering the six-month period ending April 30, 2017 Nov. 1 Paid $6,000 insurance covering the four-month period ending February 28, 2017. Dec. 1Collected $3,200 cash in advance from customers. The service revenue will be earned $800 monthly over the four-month period ending March 31, 2017 Collected $6,000 cash in advance from customers. The service revenue will be earned $1,200 monthly over the five-month period ending April 30, 2017 Dec. 1

Solution

Journal entries

requirement -3

ledger accounts

requirement-1

date

explanation

debit

credit

prepaid rent

1-

1-Nov

prepaid rent

7200

cash

7200

rent expense

1200

cash

7200

balance

6000

2-

1-Nov

prepaid insurance

6000

prepaid insurance

cash

6000

cash

6000

insurance expense

3000

3-

1-Dec

cash

3200

unearned revenue

unearned revenue

3200

earned revenue

800

cash

3200

earned revenue

1200

cash

6000

4-

1-Dec

cash

6000

balance

7200

unearned revenue

6000

rent expense

requirement-2

Adjustment entries

prepaid rent

1200

balance

1200

date

explanation

debit

credit

31-Dec

rent expense

1200

insurance expense

prepaid rent

1200

prepaid insurance

3000

balance

3000

31-Dec

insurance expense

3000

earned revenue

prepaid insurance

3000

balance

2000

unearned revenue

800

unearned revenue

1200

31-Dec

unearned revenue

800

earned revenue

800

31-Dec

unearned revenue

1200

earned revenue

1200

requirement-4

date

explanation

debit

credit

4-

1-Nov

rent expense

7200

ledger accounts

cash

7200

prepaid rent

rent expense

1200

balance

1200

1-Nov

insurance expense

6000

cash

6000

prepaid insurance

1-Dec

cash

3200

insurance expense

3000

balance

3000

earned revenue

3200

unearned revenue

1-Dec

cash

6000

balance

2000

earned revenue

800

earned revenue

6000

earned revenue

1200

adjustment entries

date

explanation

debit

credit

rent expense

31-Dec

prepaid rent

1200

cash

7200

prepaid rent

1200

rent expense

1200

balance

6000

insurance expense

31-Dec

prepaid insurance

3000

cash

6000

prepaid insurance

3000

insurance expense

3000

balance

3000

earned revenue

31-Dec

earned revenue

800

unearned revenue

800

cash

3200

unearned revenue

800

unearned revenue

1200

unearned revenue

6000

balance

7200

31-Dec

earned revenue

1200

unearned revenue

1200

requirement-5

Balance

Balance as per requirement

balance as per requirement 4

rent expense

1200

6000

insurance expense

3000

3000

earned revenue

2000

7200

unearned revenue

7200

2000

prepaid rent

6000

1200

prepaid insurance

3000

3000

	Journal entries				requirement -3		ledger accounts
requirement-1	date	explanation	debit	credit			prepaid rent
1-	1-Nov	prepaid rent	7200			cash	7200	rent expense	1200
		cash		7200				balance	6000
2-	1-Nov	prepaid insurance	6000				prepaid insurance
		cash		6000		cash	6000	insurance expense	3000
3-	1-Dec	cash	3200				unearned revenue
		unearned revenue		3200		earned revenue	800	cash	3200
						earned revenue	1200	cash	6000
4-	1-Dec	cash	6000			balance	7200
		unearned revenue		6000
							rent expense
requirement-2	Adjustment entries					prepaid rent	1200	balance	1200
	date	explanation	debit	credit
	31-Dec	rent expense	1200				insurance expense
		prepaid rent		1200		prepaid insurance	3000	balance	3000
	31-Dec	insurance expense	3000				earned revenue
		prepaid insurance		3000		balance	2000	unearned revenue	800
								unearned revenue	1200
	31-Dec	unearned revenue	800
		earned revenue		800
	31-Dec	unearned revenue	1200
		earned revenue		1200
requirement-4	date	explanation	debit	credit
4-	1-Nov	rent expense	7200				ledger accounts
		cash		7200			prepaid rent
						rent expense	1200	balance	1200
	1-Nov	insurance expense	6000
		cash		6000
							prepaid insurance
	1-Dec	cash	3200			insurance expense	3000	balance	3000
		earned revenue		3200
							unearned revenue
	1-Dec	cash	6000			balance	2000	earned revenue	800
		earned revenue		6000				earned revenue	1200
		adjustment entries
	date	explanation	debit	credit			rent expense
	31-Dec	prepaid rent	1200			cash	7200	prepaid rent	1200
		rent expense		1200				balance	6000
							insurance expense
	31-Dec	prepaid insurance	3000			cash	6000	prepaid insurance	3000
		insurance expense		3000				balance	3000
							earned revenue
	31-Dec	earned revenue	800			unearned revenue	800	cash	3200
		unearned revenue		800		unearned revenue	1200	unearned revenue	6000
						balance	7200
	31-Dec	earned revenue	1200
		unearned revenue		1200
requirement-5	Balance	Balance as per requirement	balance as per requirement 4
	rent expense	1200	6000
	insurance expense	3000	3000
	earned revenue	2000	7200
	unearned revenue	7200	2000
	prepaid rent	6000	1200
	prepaid insurance	3000	3000