Exercise 128 The following information relates to the Morgan

Exercise 128 The following information relates to the Morganstern Magazine Company at the end of 2017. The accounting period is the calendar year. 1. An insurance premium of $6,000 was paid on March 1, 2017, and was charged to Prepaid Insurance. The premium covers a 24-month period beginning March 1, 2017. 2. On June 1, 2017, cash of $54,000 was received from subscribers (customers) for a 36-month subscription period beginning on that date. The receipt was recorded by 3. The Supplies account showed a balance of $5,000 at the beginning of 2017. Supplies costing $16,000 were purchased during 2017 and debited to the asset account. a debit to Cash and a credit to Unearned Subscription Revenue Supplies of $3,000 were on hand at December 31, 2017. Using the information given above, prepare the necessary adjusting entries at December 31, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. 3. SHOW LIST OF ACCOUNTS

Solution

1 Prepaid insurance 2500 =6000/24*10        Insurance expense 2500 2 Unearned subscription revenue 10500 =54000/36*7         Subscription revenue 10500 3 Supplies expense 18000 =5000+16000-3000         Supplies 18000