Question

please answer all parts to the question

Question 3 (35 points: 7 points each for (a) through (e) below) (a) on August 1* 2015 ABC Co. pays $18,000 to XYZ Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31*. In the space below, prepare the journal entries that ABC Co. must record in 2015. Account Titles Debit Amount Credit Amount Date (b) Use the information in the question above and prepare the journal entries that XYZ Insurance Co. must record in 2015. Date Account Titles Debit Amount Credit Amount (c) In November and December 2014, Lane Co., a newly organized magazine publisher, received cash of $60,000 for 1,000 three-year subscriptions at $20 per year, starting with the January 2015 issue. What amount should Lane report in its calendar year 2014 income statement for subscriptions revenue? 5

Answer 1

Since we can answer upto 4 subparts, we will answer first 4 subparts.

Credit Date Description a 01-Aug-15 Prepaid Insurance Cash Debit 18,000 18,000 2,500 31-Dec-15 Insurance Prepaid Insurance $18,000 x 5/36 2,500 18,000 b 01-Aug-15 Cash Unearned Revenue 18,000 2,500 31-Dec-15 Unearned Revenue Service Revenue 2,500 C 60,000 Nov-14 Cash Earned Revenue 60,000 d 4,800 Dec-31 Salaries expense salaries Payable $8,000 x 3/5 4,800 $8,000 x 2/5 Jan-02 Salaries expense salaries Payable Cash 3,200 4,800 8,000

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