Consider the following situations for Shocker: a. On November 28, 2021, Shocker receives a $4,200 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue is credited.
b. On December 1, 2021, the company pays a local radio station $2,640 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.
c. Employee salaries for the month of December totaling $7,800 will be paid on January 7, 2022.
d. On August 31, 2021, Shocker borrows $68,000 from a local bank. A note is signed with principal and 6% interest to be paid on August 31, 2022.

Required:
Record the necessary adjusting entries for Shocker at December 31, 2018. No adjusting entries were made during the year.

(a)Dr Unearned Revenue$1,400

Cr Service Revenue $1,400

(b)Dr Advertising Expense$880

Cr Prepaid Advertising $880

(c)Dr Salaries Expense$7,800

Cr Salaries Payable $7,800

(d)Dr Interest Expense$1,360

Interest Payable $1,360

Explanation:

Preparation of Journal entries

(a) Based on the information given we were told that Shocker receives the amount of $4,200 payment from a customer for the services they would rendered over the next 3 months which means that the Journal entry will be:

Dr Unearned Revenue$1,400

($4,200 x 1/3)

Cr Service Revenue $1,400

(b) Based on the information given we were told that the company pays a local radio station the amount of $2,640 for radio ads throughout three month which are December, January, and Februarywhich means that the Journal entry will be recorded as:

Dr Advertising Expense$880

($2,640 x 1/3)

Cr Prepaid Advertising $880

(c) Based on the information given we were told that the company Employee salaries for the month of December was the amount of $7,800 which will be paid on January 7, 2022 which means that the Journal entry will be:

Dr Salaries Expense$7,800

Cr Salaries Payable $7,800

(d) Based on the information given we were told that Shocker borrows the amount of $68,000 from a local bank which means that the Journal entry will be:

Dr Interest Expense$1,360

($68,000 x 6% x 4/12)

Interest Payable $1,360

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