Question

The Krug Company received $18,000 on November 1 for six month's rent in advance and recorded...

The Krug Company received $18,000 on November 1 for six month's rent in advance and recorded the transaction to the rent revenue account. The December 31 adjusting entry would be:

A company paid $6,000 on June 1 for a one year insurance policy and recorded the transaction to the insurance expense account. The December 31 adjusting entry would be:

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Homework Answers

Answer #1

1)Advance Rent received $ 18000

Rent starts on November 1

Period 6 Months

Period expired at year ended 2 Months

Rent to be expensed = $ 18000 * 2/6 = $ 6000

Unexpired Rent to be recorded in next year = $ 18000 * 4/6 = $ 12000

Adjustment Entry at year end Dec 31

Particulars    Debit   Credit

Rent Revenue $ 12000   

Advance Rent Revenue        $ 12000   

2) Insurance Paid     $ 6000

Insurance starts on June 1

Period 12 Months

Period expired at year ended 7 Months

Rent to be expensed = $ 6000 * 7/12 = $ 3500

Unexpired Insurance to be recorded in next year = $ 6000 * 5/12 = $ 2500

Adjustment Entry on Dec 31

Prepaid Insurance $ 2500

Insurance Expense $2500

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