Exercise 4-17 (Part Level Submission) Action Quest Games Inc. adjusts its accoun

Question

Exercise 4-17 (Part Level Submission) Action Quest Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2017 1. Purchased a 1-year insurance policy on June 1 for $2,040 cash. 2. Paid $5,900 on August 31 for 5 months' rent in advance. On September 4, received $2,880 cash in advance from a corporation to sponsor a game each month for a total of 9 months for the most improved students at a local school Signed a contract for cleaning services starting December 1 for $800 per month. Paid for the first 2 months on November 30. (Hint: Use the account Prepaid Cleaning to record prepayments.) On December 5, received $1,550 in advance from a gaming club. Determined that on December 31, $600 of these games had not yet been played. 3. 4. 5.

Explanation / Answer

No. Date Account Title and explanation Debit Credit 1 Dec.31, 2017 Prepaid expense $850 (2040*(5/12)) 850 Insurance expense $850 ( To record insurance paid in advance for Jan. To May 2018) 2 Dec.31, 2017 Prepaid expense $1,180 (5900*(1/5)) 1180 Rent expense $1,180 ( To record rent paid in advance for January 2018) 3 Dec.31, 2017 Service revenue $1,920 (2880*(6/9) 1920 Unearned sevice revenue $1,920 ( To record unearned revenue liability ) 4 Dec.31, 2017 Prepaid cleaning $800 Maintenancr and repair expenses $800 (To record prepayment for cleaning service) 5 Dec.31, 2017 Service revenue $600 Unearned service revenue $600 (To record unearned revenue liability)

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