faraday electronic service repairs stereos and dvd players duri 239642

Faraday Electronic Service repairs stereos and DVD players. During a recent year, Faraday engaged in the following activities:

a. On September 1, Faraday paid Wausau Insurance $1,860 for its liability insurance for the next 12 months. The full amount of the prepayment was debited to prepaid insurance.

b. At December 31, Faraday estimates that $830 of utility costs are unrecorded and unpaid.

c. Faraday rents its testing equipment from JVC. Equipment rent in the amount of $1,440 is unpaid and unrecorded at December 31.

d. In late October, Faraday agreed to become the sponsor for the sports segment of the evening news program on a local television station. The station billed Faraday $3,300 for three months’ sponsorship-November 2009, December 2009, and January 2010-in advance. When these payments were made, Faraday debited prepaid advertising expense. At December 31, two months’ advertising expense has been used and one month remains unused.

Required:

1. Prepare adjusting entries at December 31 for these four activities.

2. What would be the effect on expenses if the adjusting entries were not made?

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