Exercise Set A

LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.

1. sold goods to customers on credit
2. collected cash from customer accounts
3. sold goods to customers for cash
4. collected cash in advance for goods to be delivered later

LO 4.2Identify whether each of the following transactions, which are related to expense recognition, are accrual, deferral, or neither.

1. paid an expense for the current month
2. prepaid an expense for future months
3. made a payment to reduce accounts payable
4. incurred a current-month expense, to be paid next month

LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.

1. rent paid in advance for use of property
2. cash received in advance for future services
3. supplies inventory purchased
4. fees earned but not yet collected

LO 4.2The following accounts were used to make year-end adjustments. Identify the related account that is associated with this account (the other account in the adjusting entry).

1. Salaries Payable
2. Depreciation Expense
3. Supplies
4. Unearned Rent

LO 4.2 and LO 4.3Reviewing insurance policies revealed that a single policy was purchased on August 1, for one year’s coverage, in the amount of $6,000. There was no previous balance in the Prepaid Insurance account at that time. Based on the information provided:

1. Make the December 31 adjusting journal entry to bring the balances to correct.
2. Show the impact that these transactions had.

LO 4.3On July 1, a client paid an advance payment (retainer) of $5,000 to cover future legal services. During the period, the company completed $3,500 of the agreed-on services for the client. There was no beginning balance in the Unearned Revenue account for the period. Based on the information provided,

1. Make the December 31 adjusting journal entry to bring the balances to correct.
2. Show the impact that these transactions had.

LO 4.3Reviewing payroll records indicates that employee salaries that are due to be paid on January 3 include $3,575 in wages for the last week of December. There was no previous balance in the Salaries Payable account at that time. Based on the information provided, make the December 31 adjusting journal entry to bring the balances to correct.

LO 4.3Supplies were purchased on January 1, to be used throughout the year, in the amount of $8,500. On December 31, a physical count revealed that the remaining supplies totaled $1,200. There was no beginning of the year balance in the Supplies account. Based on the information provided:

1. Create journal entries for the original transaction
2. Create journal entries for the December 31 adjustment needed to bring the balances to correct
3. Show the activity, with ending balance

LO 4.3Prepare journal entries to record the following business transaction and related adjusting entry.

1. January 12, purchased supplies for cash, to be used all year, $3,850
2. December 31, physical count of remaining supplies, $800

LO 4.3Prepare journal entries to record the following adjustments.

1. Insurance that expired this period, $18,000
2. Depreciation on assets, $4,800
3. Salaries earned by employees but unpaid, $1,200

LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.

1. depreciation on fixed assets, $ 8,500
2. unexpired prepaid rent, $12,500
3. remaining balance of unearned revenue, $555

LO 4.4Prepare an adjusted trial balance from the following adjusted account balances (assume accounts have normal balances).

LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances).

Adjustments needed:

Salaries due to administrative employees, but unpaid at period end, $2,000

Insurance still unexpired at end of the period, $12,000

LO 4.5From the following Company A adjusted trial balance, prepare simple financial statements, as follows:

1. Income Statement
2. Retained Earnings Statement
3. Balance Sheet