Johnson's boat yard Inc., is completing the accounting process fr he year just ended, Novembe. 30, 2010. The transactions during 2010 have been journalized and posted. The following data with respect to adjusting entries are available:
On October 1,2010, Johnson paid $1,200 to the local newspaper for an advertisement to run every Thursday for 12 weeks. All ads have been run except for three Thursdays in December to complete the 12-week contract.
Question 1: record the adjusting entry that suld be recorded for johnson's at November 30, 2010.
advertising expense. 800
Prepaid advertising. 800
I got 800 because I figur there's 8 weeks in october and November so I did this : $1,200 x 8/12 and that gave me $800.
The thing is that the solution in the book says $900. They multiplied 9/12 by $1,200=$900
I'm confused as to why they used 9 weeks instead of 8 weeks.if somebody could clear that up for me I would appreciate it. Thank you
- MarcLv 710 years agoFavorite Answer
They tell you that "All ads have been run except for three Thursdays in December to complete the 12-week contract".
12 - 3 = 9
So nine - twelfths of the advertising cost needs to be expensed.
9 /12 X $1,200 = $900
One of the months, (probably October since it is a 31 day month) will have 5 Thursdays in it. For example, October 2009 did have five Thursdays in it.Source(s): 35 years of accounting experience