ABC INC. Trial Balance December 31, 2008 DR CR Cash Accounts Reccivable Prepaid
ID: 2391489 • Letter: A
Question
ABC INC. Trial Balance December 31, 2008 DR CR Cash Accounts Reccivable Prepaid Insurance Equipment Accumulated Depreciation - Equipment Unearned Revenue Notes Payable Retained Earnings Common Stock Fee Revenue Salaries Expense Supplics Expense Interest Expense S 28,400 12,500 7,200 25,000 S 800 6,000 7,950 5,000 29,000 39,000 13,200 950 500 On May 1, 2008, ABC Inc. paid for $7,200 for a one year insurance policy. The adjusting entry on December 31, 2008 is a: a. debit to Insurance Expense and a credit to Cash b. debit to Insurance Expense and a credit to Prepaid Insurance c. debit to Prepaid Insurance and a credit to Cash d. debit to Prepaid Insurance and a credit to Insurance Expense e. none of the above Refer to the previous question. The amount of the entry is: On December 1, 2008, ABC received $6,000 in advance for services to be performed over the next 12 months. The adjusting entry on December 31, 2008 is a: a. debit to Cash and a credit to Unearned Revenue b. debit to Fec Revenue and a credit to Unearned Revenue c. debit to Unearned Revenue and a credit to Cash d. debit to Unearned Revenue and a credit to Fec Revenue e. None of the above Refer to the previous question. The amount of the adjusting entry is:Explanation / Answer
Answer: Option b. debit to Insurance Expense and a credit to Prepaid Insurance.
The insurance that is expired from May 1 to December 31, 2008 will be debited to the insurance expense account and the prepaid insurance will be reduced to the same extent by crediting the prepaid insurance account.
The amount of the entry is: $4800
$7200 x 8/12 = $4800
Answer: Option d. debit to Unearned Revenue and a credit to Fee Revenue.
The revenue earned in the month of December 2008 will be credited to the fee revenue account and unearned revenue account will be debited by the same.
The amount of the adjusting entry is: $500
$6000 x 1/12 = $500