17 Jan On June 1, 2016, Penelope Bermudez established her
On June 1, 2016, Penelope Bermudez established her own advertising firm. Selected transactions for the first few days of June follow.DATETRANSACTIONS2016June 1Signed a lease for an office and issued Check 101 for $18,000 to pay the rent in advance for six months.1Borrowed money from National Trust Bank by issuing a three-month, 10 percent note for $18,000; received $17,550 because the bank deducted interest in advance.1Signed an agreement with Glass Decorations Inc. to provide advertising consulting for one year at $4,550 per month; received the entire fee of $54,600 in advance.1Purchased office equipment for $15,400 from The Equipment Depot; issued a three-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,000 salvage value and will be depreciated using the straight-line method.1Purchased a one-year insurance policy and issued Check 102 for $1,944 to pay the entire premium.3Purchased office furniture for $17,400 from Office Gallery; issued Check 103 for $8,400 and agreed to pay the balance in 60 days. The furniture is estimated to have a useful life of five years and a $1,200 salvage value and will be depreciated using the straight-line method.5Purchased office supplies for $2,810 with Check 104; assume $1,150 of supplies are on hand June 30, 2016.INSTRUCTIONS 1. Record the transactions on page 1 of the general journal. Omit descriptions. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability.2. Record the adjusting journal entries that must be made on June 30, 2016, on page 2 of the general journal. Omit descriptions.Analyze: At the end of the year, 2016, how much of the rent paid on June 1 will have been charged to expense?View Solution: On June 1 2016 Penelope Bermudez established her own advertising
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