The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Stable Designs received a $400 utility bill for the current month’s electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Stable Designs make to record this transaction?

Costs incurred during an accounting period but unpaid and unrecorded are accrued expenses.

On April 12, Targareyan Enterprises agrees to accept a 60-day, 10%, $4,500 note from Lannister, Ltd. to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Lannister, Inc.?

On January 1, Western College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. Assuming the college prepares adjustments monthly, what amount of tuition revenue should the college recognize on  February 28?

Becky Smalls is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $118,500 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee’s pay. The amount of federal income tax withheld from her earnings was $1,325.17. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)

On March 12, Korn Company sold merchandise in the amount of $7,800 to Babcock Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Korn uses the perpetual inventory system and the gross method of accounting for sales. Babcock pays the invoice on March 17, and takes the appropriate discount. The journal entry that Korn makes on March 17 is:

On April 12, Targareyan Enterprises agrees to accept a 60-day, 10%, $4,500 note from Lannister, Ltd. to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Lannister, Inc.?

Costs incurred during an accounting period but unpaid and unrecorded are accrued expenses.

On April 1, Albuquerque, Inc. paid Penthouse Publishing Company $1,548 for 36-month subscriptions to several different magazines. Albuquerque debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Albuquerque, Inc. after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?