Answer:
(a) On November 28, 2018, Shocker receives a $3,000 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue is credited.
Assets = Lower by $ 3,000
Liabilities = No Effect
Stockholders Equity = No Effect
(b) On December 1, 2018, the company pays a local radio station $2,400 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.
Assets = Higher by $ 2,400
Liabilities = No Effect
Stockholders Equity = No Effect
(c) Employee salaries for the month of December totaling $7,000 will be paid on January 7, 2016.
Assets = No Effect
Liabilities = Lower by $ 7,000
Stockholders Equity = Higher by $ 7,000
(d) On August 31, 2018, Shocker borrows $60,000 from a local bank. A note is signed with principal and 8% interest to be paid on August 31, 2019
Assets= Lower by $ 60,000
Liabilities = Lower by $ 60,000
Stockholders Equity = Higher by $4,800
Explanation:
(a) On November 28, 2018, Shocker receives a $3,000 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue is credited.
Recognise an Asset - Cash and a Liability - Deferred Revenue. Only Liability was Recognised
(b) On December 1, 2018, the company pays a local radio station $2,400 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.
Recognise Asset - Prepaid Advertising and De-recognise Asset - Cash. Only Prepaid Advertising was recognised
(c) Employee salaries for the month of December totaling $7,000 will be paid on January 7, 2016.
Recognise a Liability Salaries Payable and an expense Salaries and Wages. Both items were not recognised
(d) On August 31, 2018, Shocker borrows $60,000 from a local bank. A note is signed with principal and 8% interest to be paid on August 31, 2019
Recognise the Liability - Loan and recognise the asset - Cash. Also recognise the expense that accrue as a result of interest on August 31.
