www-awhaleks.crn/alekscgonsLexe/10gNs kr 7)P3j+Dx7HFZvit 1 3yeOfEp1hwogbusqssewa

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www-awhaleks.crn/alekscgonsLexe/10gNs kr 7)P3j+Dx7HFZvit 1 3yeOfEp1hwogbusqssewar ALEKS Calendar On August 1, Davis Company paid S9,300 for one year of advertising in advance, On August 1 Davis Company debited Advertising Expense, which is an alternate way of recording the initial expenditure. Assume that the advertising is used evenly throughout the year Required: Journalize the adjusting entry on December 31. Date Account Title Debit Credit Dec. 31(Choose one) Clear Undo Help Next >> Explain Type here to search 0

Explanation / Answer

Expired period of advertising from August 1 to December 31 = 5 months

So, Expenses for the year will be for 5 months and remaining 7 months will be prepaid expenses

Expenses to be recognized for the year

= Amount paid x Expired period / Total period

= $9,300 x 5 / 12

= $ 3,875

So, prepaid expense

= Total amount paid – Expenses

= $9,300 - $3,875

= $ 5,425

As the entire amount has been debited to expenses, amount unexpired (prepaid) has to be transferred from expenses to prepaid expenses

Journal entry on December 31

Prepaid Advertising $ 5,425

       Advertising expenses       $ 5,425

(Being advertising expenses for 7 months transferred to prepaid expenses)

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