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?
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