LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
- earn now, collect now
- earn now, collect later
- earn later, collect now
LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.
- paid balance due for accounts payable $6,900
- charged clients for legal services provided $5,200
- purchased supplies on account $1,750
- collected legal service fees from clients for current month $3,700
- issued stock in exchange for a note payable $10,000
LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, deferred expense, or estimate.
- utilities owed but not paid
- cash received in advance for future services
- supplies inventory purchased
- fees earned but not yet collected
- depreciation expense recorded
- insurance paid for future periods
LO 4.2Identify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
- accounts receivable
- interest payable
- prepaid insurance
- unearned rent
LO 4.2Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).
| Impact 1 | Impact 2 | ||
|---|---|---|---|
| A. | Unearned Fees adjusted from $7,000 to $5,000 | ||
| B. | Recorded depreciation expense of $12,000 | ||
| C. | Prepaid Insurance adjusted from $18,500 to $6,300 | ||
| D. | Supplies account balance $500, actual count $220 |
LO 4.2What two accounts are affected by each of these adjustments?
- billed customers for services provided
- adjusted prepaid insurance to correct
- recorded depreciation expense
- recorded unpaid utility bill
- adjusted supplies inventory to correct
LO 4.3Using the following information:
- make the December 31 adjusting journal entry for depreciation
- determine the net book value (NBV) of the asset on December 31
- Cost of asset, $250,000
- Accumulated depreciation, beginning of year, $80,000
- Current year depreciation, $25,000
LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.
LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.
LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Interest Payable, post any entries that affect the account, and tally the ending balance for the account (assume Interest Payable beginning balance of $2,500).
- March 1, paid interest due on note, $2,500
- December 31, interest accrued on note payable, $4,250
LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Prepaid Insurance, post any entries that affect the account, and tally the ending balance for the account (assume Prepaid Insurance beginning balance of $9,000).
- April 1, paid cash for one-year policy, $18,000
- December 31, unexpired premiums, $4,500
LO 4.3Determine the amount of cash expended for Salaries during the month, based on the entries in the following accounts (assume 0 beginning balances).
LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
- supplies actual count at year end, $6,500
- remaining unexpired insurance, $6,000
- remaining unearned service revenue, $1,200
- salaries owed to employees, $2,400
- depreciation on property plant and equipment, $18,000
LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Cash (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). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.
Adjustments needed:
- Salaries due to employees, but unpaid at the end of the period, $2,000
- Insurance still unexpired at end of the period, $12,000
LO 4.4Prepare an adjusted trial balance from the following account information, and also considering the adjustment data provided (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.
Adjustments needed:
- Remaining unpaid Salaries due to employees at the end of the period, $0
- Accrued Interest Payable at the end of the period, $7,700
LO 4.5Using the following Company W information, prepare a Retained Earnings Statement.
- Retained earnings balance January 1, 2019, $43,500
- Net income for year 2019, $55,289
- Dividends declared and paid for year 2019, $18,000
LO 4.5From the following Company Y adjusted trial balance, prepare simple financial statements, as follows:
- Income Statement
- Retained Earnings Statement
- Balance Sheet