A review of the accounts of Kingbird, Inc. reflected the following transactions,

Question

A review of the accounts of Kingbird, Inc. reflected the following transactions, which may or may not require adjustment for the year ended December 31, 2017. 1. The Prepaid Rent account shows a debit of $7,320 paid October 1, 2017, for a one-year lease that started on that day. The payment was for the last month's rent plus five months' rent starting on October 1, 2017 2. On November 1, 2017, Services Revenue was credited $2,000 that was paid by a client for audit services to be performed in January. 3. On June 1, 2017, a cheque in the amount of $7,200 was issued for a two-year subscription to a trade publication starting on June 1, 2017. The amount was charged to Operating Expenses. 4. Interest of $1,130 has accrued on notes payable. Prepare the adjusting entry for each item. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Do not round intermediate calculations.) No. Account Titles and Explanation Debit Credit 2. 3. 4

Explanation / Answer

Adjusting entry :

No Account and explanation debit credit 1 Rent expense (7320*4/6) 4880 Prepaid rent 4880 (To record prepaid rent adjusted) 2 Service revenue 2000 Unearned service revenue 2000 (To record unearned service revenue) 3 Prepaid susbcription expense (7200*17/24)) 5100 Operating expense 5100 (To record operating expense adjusted) 4 Interest expense 1130 Interest payable 1130 (To record accured interest)

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