On November 27,2018,Metro Delivery Service Company Signs a Contract with Brooklyn

question 27

Essay

On November 27,2018,Metro Delivery Service Company signs a contract with Brooklyn Financial Services Company.Metro Delivery Service will provide 3 months of local delivery services for $5,000 per month.Brooklyn pays $15,000 cash to Metro on November 27,2018.Delivery services will begin on December 1,2018.Complete the following requirements for Metro Delivery Services.
(1)Prepare the journal entries for November 27,2018 and December 31,2018 (the end of Metro's fiscal year).Make proper journal entries (omit explanations).Deferred revenues are treated initially as liabilities.
(2)If Metro fails to record the December 31,2018 adjusting entry,what is the effect on net income,income statement account(s)and balance sheet account(s)?
(3)Why is it important for companies to record adjusting entries?

Understand the principles of recording interest income and the impact on financial statements.

Grasp the concept and implications of loan collateralization and the responsibilities of borrowing and lending parties.

Master the process of recognizing and recording sales and interest income on notes receivable.

Identify the signs and implications of aggressive or conservative revenue recognition policies on financial statements.

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Definitions:

Price Received

The actual amount of money that a seller gets from a buyer for a good or service, after discounts or adjustments.

Market Participants

Individuals or institutions that are involved in buying, selling, and trading in financial markets, including buyers, sellers, investors, speculators, and market makers.

Price Received

The actual amount of money received by a producer or seller from a buyer for a unit of goods or services, after discounts, taxes, and any other adjustments.

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of a good.