Problem 3-3A Record adjusting entries (LO3-3)

The information necessary for preparing the 2018 year-end adjusting entries for Gamecock Advertising Agency appears below. Gamecocks fiscal year-end is December 31.

a. On July 1, 2018, Gamecock receives $4,400 from a customer for advertising services to be given evenly over the next 10 months. Gamecock credits Deferred Revenue.

b. At the beginning of the year, Gamecocks depreciable equipment has a cost of $21,600, a four-year life, and no salvage value. The equipment is depreciated evenly (straight-line depreciation method) over the four years.

c. On May 1, 2018, the company pays $2,880 for a two-year fire and liability insurance policy and debits Prepaid Insurance.

d. On September 1, 2018, the company borrows $26,000 from a local bank and signs a note. Principal and interest at 12% will be paid on August 31, 2019.

e. At year-end there is a $1,900 debit balance in the Supplies (asset) account. Only $840 of supplies remains on hand.