Consider the following situations:
1. American Airlines operates a flight from Dallas to Los Angeles on August 16. The pilots’ salaries associated with the flight are paid on September 2.
2. Eddie Bauer pays cash on January 6 to purchase sunglasses from a wholesale distributor. The sunglasses are sold to customers on January 27.
3. On January 1, Pizza Hut pays for a one-year property insurance policy with coverage starting immediately.
4. Sports Illustrated signs an agreement with CBS on January 12 to provide television advertisements during the Super Bowl. Payment is due within 3 weeks after February 4, the day of the Super Bowl. Sports Illustrated makes the payment on February 23.
Required:
For each situation, determine the date for which the company recognizes the expense under accrual-basis accounting.
Want to see the full answer?
Check out a sample textbook solutionChapter 3 Solutions
FINANCIAL ACCOUNTING W/ACCESS >CI<
- 7-4 On June 20, 2021, Amy Smith, owner of Amy’s Floral Shop, Inc., signed a contract to rent a retail store. As part of the contract, Amy paid four months of rent in advance. The rental rate is $3,000 per month, thus she paid $12,000 cash in advance when she signed the contract on June 20. Amy will move into the retail store on July 1, 2021, which is the start of her rental period. The company has the accounting policy that all prepaid assets are initially recorded in asset accounts. The following is a partial list of the accounts in Amy’s General Ledger. These are the only accounts you need for this problem. Cash Prepaid Rent (asset account) Rent Expense Requirement 1 Prepare the General Journal entry to record the $12,000 payment made when the rental contract was signed on June 20, 2021. Requirement 2 Fill-in the amounts on the Prepaid Rent timeline. The boxes above the timeline show the amount of Prepaid Rent still remaining at various dates during the four month period. The…arrow_forwardConsider the following situations for Shocker: a. On November 28, 2018, Shocker receives a $4,350 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue is credited.b. On December 1, 2018, the company pays a local radio station $2,670 for 30 radio ads that were to be aired, 10 per month, throughout December, January, and February. Prepaid Advertising is debited.c. Employee salaries for the month of December totaling $7,900 will be paid on January 7, 2016.d. On August 31, 2018, Shocker borrows $69,000 from a local bank. A note is signed with principal and 8% interest to be paid on August 31, 2019. Required: Indicate by how much the assets, liabilities, and stockholders' equity in the December 31, 2018, balance sheet is higher or lower if the adjustment is not recorded. (If none of the categories apply for a particular item, leave the cell blank.)arrow_forwardBelow are transactions for Bronco Corporation during the month of June. Calculate the amount of expense to recognize in June. If the transaction does not require an expense to be recognized, indicate how the transaction would be reported. a. Pay $600 cash to employees for work performed during June. b. Receive a $200 telephone bill for the month of June, but Bronco does not plan to pay the bill until early next month. c. Pay $500 on account for supplies purchased last month. All supplies were used last month.arrow_forward
- For each of the following independent situations, prepare journal entries to record the initial transaction on September 30 and the adjustment required on October 31.a. Hockey Helpers paid $4,000 cash on September 30 to rent an arena for the months of Octoberand November.b. Super Stage Shows received $16,000 on September 30 for season tickets that admit patrons toa theatre event that will be held twice (on October 31 and November 30).c. Risky Ventures paid $3,000 on September 30 for insurance coverage for the months ofOctober, November, and December.arrow_forwardWhich of the following events would be recognized in the accounting records of Progusto Consultants on the date indicated? Explain your answer. Feb. 15 : Progusto Consultants offers to purchase a piece of land for $1,200,000. There is a high likelihood that the offer will be accepted. March 2 : Progusto Consultants recieved notice that its rentals for their office will increase from $40,000 to $45,000 per month starting May 1. April 29 : The Business recieves its electricity bill for the month of April. The bill is due to May 5. July 5 : Progusto places an order for an office equipment costing $85,000 Aug. 6 : The office equipment ordered on July 5 is delivered. Payment will be due on Sept. 1 Sep. 5 : The business hired a new office clerk.arrow_forwardWhich of the following is not an accrued expense? A. A company prepays for Internet services for one month in advance. B. The lawn maintenance company has completed sprinkler maintenance services yethas not issued an invoice as of yet. C. You receive delivery of a computer on May 5 and the invoice won’t post until afterJune 1. D. The office supply store delivers merchandise and your corporate account is billed.You have 90 days to make the payment.arrow_forward
- The Jamesway Corporation had the following situations on December 2021. On December 10, 2021, Jamesway received a $4,000 payment from a customer for services begun on that date and which were completed by December 31, 2021. Deferred service revenue was credited. On December 1, 2021, the company paid a local radio station $2,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited. Employee salaries for the month of December totaling $16,000 will be paid on January 7, 2022. On August 31, 2021, Jamesway borrowed $60,000 from a local bank. A note was signed with principal and 8% interest to be paid on August 31, 2022. If none of the adjusting journal entries were recorded, would assets, liabilities, and shareholders’ equity on the 12/31/2021 balance sheet be higher or lower and by how much?arrow_forwardCan someone please check this? Gomez Company had the following transactions in the last two months of its year ended December 31. November 1 Paid $2,000 cash for future advertising. November 1 Paid $3,120 cash for 12 months of insurance through October 31 of the next year. November 30 Received $6,600 cash for future services to be provided to a customer. December 1 Paid $12,000 cash for consulting to be received over the next eight months. December 15 Received $10,550 cash for future services to be provided to a customer. December 31 Of the advertising paid for on November 1, $1,450 worth is not yet used. December 31 A portion of the insurance paid for on November 1 has expired. No adjustment was made in November. December 31 Services worth $1,100 are not yet provided to the customer who paid on November 30. December 31 One-eighth of the consulting paid for on December 1 has been received. December 31 The company has performed $3,900 of services that the customer…arrow_forwardBelow are four independent cases (a to d) affecting Wong Auto Repair Inc. (WARI) in 2019.a. Each Friday, WARI pays employees for the current week’s work. The amount of the payroll is$6,000 for a five-day week. The current accounting period ends on Monday.b. WARI has received notes receivable from some clients for services. During the current year, WARIhas earned accrued interest revenue of $3,250, which will be received next year.c. The beginning balance of supplies was $15,500. During the year, then entity purchased suppliescosting $55,400, and at December 31 the inventory of supplies on hand is $12,650.d. WARI is conducting test of new hinges to be used in the rebuilding of a dump truck, and the clientpaid WARI $15,000 at the start of the project. WARI recorded this amount as Unearned ServiceRevenue. The tests will take several months to complete. WARI executives estimate that thecompany has earned two-thirds of the total fee during the current year.RequiredJournalize the adjusting…arrow_forward
- Classic Customs began operations on December 1, 2020. In setting up the bookkeeping procedures, the company decided to debit expense accounts when the company prepays its expenses and to credit revenue accounts when customers pay for services in advance. Supplies were purchased on December 1 for $8,000. The company prepaid insurance premiums of $3,200 on December 2. On December 15, the company received an advance payment of $16,100 from one customer for re-modeling work. By counting the supplies on December 31, Classic Customs determined that $1,450 was on hand. An analysis of the insurance policies in effect on December 31 showed that $800 of insurance coverage had expired. As of December 31, it was determined that $8,500 of the amount received in advance on December 15 had been earned. Prepare journal entries for items (a) through (c) and adjusting entries as of December 31, 2020, for items (d) through (f).arrow_forwardFor each of the following transactions for New Idea Corporation, give the accounting equationeffects of the adjustments required at the end of the month on July 31:a. Received a $600 utility bill for electricity usage in July to be paid in August.b. Owed wages to 10 employees who worked three days at $100 each per day at the end of July.The company will pay employees at the end of the first week of August.c. On July 1, loaned money to an employee who agreed to repay the loan in one year along with$1,200 for one full year of interest. No interest has been recorded yet.arrow_forwardWishbone, Inc., is preparing its year-end balance sheet and needs to determine how much of its assets/liabilities are current or noncurrent. For the following transactions, determine the amount that needs to be included in the balance sheet for the period ending December 31, Year 7, as current or noncurrent. Wishbone paid $16,000 for insurance on October 1, Year 6. Insurance is $500 per month due on the last day of the month. Wishbone pays its employees the Wednesday following the close of the 2-week pay period. Wishbone has 15 employees who each work 40 hours per week for $10 per hour. In Year 7, December 31 is the second Friday of a 2-week pay period. Wishbone has a $10,000 deferred tax asset recorded on its books as of December 31, Year 7. Wishbone expects $3,000 to be reversed in Year 8. During Year 7, Wishbone invested $6,000 in trading securities. It expects to sell half in Year 8 and the remaining half in Year 9. Wishbone purchased new equipment for $15,000 on January 1, Year…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education