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.
I got:
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 !
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.
12 - 3 = 9 weeks
To understand why the book's solution used 9 weeks instead of 8 weeks, let's break down the situation.
The contract with the local newspaper was for the advertisement to run every Thursday for 12 weeks. Johnson's Boat Yard paid $1,200 for this advertisement on October 1, 2010. The problem tells us that all the ads have been run except for three Thursdays in December to complete the 12-week contract.
When calculating the cash paid in October for the advertisement, you correctly determined that there were 8 weeks in October and November (since the year ends in November). Therefore, you calculated 8/12 of the total amount paid, which gave you $800.
However, the book's solution uses 9 weeks instead of 8 weeks. Here's why:
The advertising contract was for a total of 12 weeks. Since the year ends in November and the three Thursdays in December are yet to come, it means that by November 30, only 9 weeks of advertisements have been run (12 weeks - 3 weeks). Therefore, the book's solution calculates 9/12 of the total amount paid ($1,200), resulting in an adjusting entry of $900.
In summary, the book's solution uses 9 weeks instead of 8 weeks because it accounts for the fact that the 12-week advertising contract was not fully completed by November 30, and only 9 weeks' worth of advertisements have been run at that point.