Question

The Jamesway Corporation had the following situations on December 2021. On December 10, 2021, Jamesway received a $4,800 payment from a customer for services begun on that date and which were completed by December 31, 2021. Deferred service revenue was credited. On December 1, 2021, the company paid a local radio station $3,600 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited. Employee salaries for the month of December totaling $24,000 will be paid on January 7, 2022. On August 31, 2021, Jamesway borrowed $50,000 from a local bank. A note was signed with principal and 9% interest to be paid on August 31, 2022.
Prepare the necessary adjusting entries at its year-end of December 31, 2021. No adjusting entries were recorded during the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer and Explanation:

The Journal entries are shown below:-

1. Deferred Service Revenue A/c Dr, $4,800

        To Revenue A/c  $4,800

(Being Revenue recognized is recorded)

2. Advertisement Expense A/c Dr, $1,800 ($3,600 ÷ 40 × 20)

           To Prepaid Advertisement A/c  $1,800

(Being expense recognized is recorded)

3. Employees Salaries A/c Dr, $24,000

         To Outstanding Employees Salaries A/c $24,000

(Being expense & liability is recorded)

4. Interest expense A/c Dr, $1,500 (($50,000 × 9%) ÷ 12 × 4

               To Interest Liability A/c  $1,500

(Being Interest expense and Liability is recorded)