EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidson’s Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made: At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjusting entry.

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 14A, Problem 1SEA

EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidson’s Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made:

Chapter 14A, Problem 1SEA, EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidsons Food Mart paid 1,200 in advance to the

At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjusting entry.

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

On August 2, Jun Co. receives a $6,900, 90-day, 11.0% note from customer Ryan Albany as payment on his $6,900 account receivable. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year (Do not intermediate calculations. Round your ancun

How to do this, please explain. Thank you.

On August 2, Jun Co. receives a $6,100, 90-day, 12.5% note from customer Ryan Albany as payment on his $6,100 account receivable. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year. (Do not round intermediate calculations. Round your answers to nearest whole dollar value. Use 360 days a year.)

Answer 2

Textbook Question

Chapter 14A, Problem 1SEA

EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidson’s Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made:

Chapter 14A, Problem 1SEA, EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidsons Food Mart paid 1,200 in advance to the

At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjusting entry.

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 14A, Problem 1SEA

EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidson’s Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made:

Chapter 14A, Problem 1SEA, EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidsons Food Mart paid 1,200 in advance to the

At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjusting entry.

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 14A, Problem 1SEA

EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidson’s Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made:

Chapter 14A, Problem 1SEA, EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES Davidsons Food Mart paid 1,200 in advance to the

At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjusting entry.

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Answer 8

Expert Solution & Answer

To determine

Prepare the adjusting entry.

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Prepare the adjusting entry.

Answer 12

Explanation of Solution

The expense method of accounting for prepaid expenses:

In expense method of accounting for prepaid supplies, prepaid expenses and other prepaid items are recorded as purchases during its purchase.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Record the adjusting entries under prepaid expenses method:

Date	Account titles and Explanation	Debit ($)	Credit ($)
December 31	Prepaid advertising ($1,200−$800)	400
	Advertising expense		400
	(To record amount of prepaid advertising )

Table (1)

Prepaid advertising is a current asset and it is increased. Therefore, debit prepaid advertising account by $400.
Advertising expense is a component of stockholders’ equity and it is increased. Therefore, credit advertising expense account by $400.

Answer 13

Ch. 14A - EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES...Ch. 14A - EXPENSE METHOD OF ACCOUNTING FOR PREPAID EXPENSES...

Concept explainers

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 14A Solutions