Scenario #3: Advertising Expense (10 points) At December 31, 2017, Piccirilli Wa

Question

Scenario #3: Advertising Expense (10 points) At December 31, 2017, Piccirilli Watch Co. reported Prepaid Advertising of $60,000 that represented the cost of advertising spots to appear in the January 2018 through May 2018 issues of The Active Accountant magazine. 3. On May 20, 2018, Piccirilli Watch Co. paid $168,000 cash to The Active Accountant for advertising spots to appear in the June 2018 through May 2018 issues of the magazine. The bookkeeper recorded the payment as Advertising Expense. a. Prepare the necessary adjustment for advertising at December 31, 2018 in general journal form. Post the adjusting entry to the T-accounts provided on the following page and compute the resulting balances at December 31, 2018 after adjustment. (4 points entry 2 points for posting/balance) DATE ACCOUNT NAMES DEBIT CREDIT

Explanation / Answer

the following is the required journal entry:

date account names debit credit december 31 2018 Prepaid advertising a/c $70,000 ............To Advertising expense a/c $70,000 (amount = $168,000 / 12 months * 5 months remaining till may 2019=>$70,000) (since advertising expense was initially debited with full amount of $168,000 , now it is credited for the balance amount of $70,000 in the adjusting entry).

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