Question

1. On March 1, 2019, Aloha Painting agreed to allow another company (DC Painting) to store equipment and paint in Aloha’s facility for $200 per month. A six month prepayment was paid upon signing of the agreement, but DC will not have to make the next payment until the first anniversary date of the agreement, at which time they will pay any outstanding storage fees to bring their account up to date.

Aloha Painting Company has reached the end of its first fiscal year, November 30, 2019.

Prepare any ADJUSTING JOURNAL ENTRIES required for Aloha Painting Co. at November 30, 2019

Answer 1

In march 1, 2019, storage fee was received in 6 months periods ended on September 1, 2019.

Hence, at the end of fiscal year at November 30, 2019, storage fee is accrued for 3 months i.e. from Sept 1 to Nov 30.

November 30, 2019 = 200 x 3

= $600

Thus, at November 30, 2019 Aloha painting will make following adjusting entry :

Journal

Date	Account Title and Explanation	Debit	Credit
Nov 30, 2019	Storage fee receivable	600
	Storage fee		600
	(To record storage fee accrual)