What will be the journal entries for these two transactions, in accounting?
These are the transactions for a hypothetical business called PS Music from July 1st till 31st:
1. During July, PS Music provided guest Disc Jockeys for KXMD for a total of 115 hours; The contact requires PS music to provide for 80hrs per month for a monthly fee of $3600. Beyond 80, $40 per hour will be charged and the patent received $7200 as advance payment for two months
2. Paid a premium of 2700 for insurance policy covering 1 year period
What will be the corresponding journal entries in terms of financial accounting to these transactions?
- ProfLv 74 years ago
You have to decide what was exchanged and how much was involved.
800 hours cost $3,600
The remaining 35 hours cost 35 x $40 = $1,400.
So the total for 115 hours is $5,000
Now we run into a problem: Where did a "patent" come from? What does a patent have to do with charging for disk jockeys? When yo mix two transactions into one sentence without explaining, you create confusion.
Decide what was received and debit it as an asset. Decide what was given up and credit it as a service. If more was received than the service provided, you have to credit unearned revenue. the way you word the problem it is impossible to determine just what happened. Once you understand what was received and what was given up, the entry becomes obvious.
The second entry is obvious as well. You bought prepaid insurance and yo paid cash. At the end of July you may need an adjusting entry to record the June insurance expense, but the problem does not ask for that.
If you ask the question intelligently, you may get a better answer.