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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 3-45 Identification of Adjusting Entries

Conklin Services prepares financial statements only once per year using an annual accounting ending on December 31. Each of the following statements describes an entry made by Conklin on December 31 of a recent year.

  1. On December 31, Conklin completed a service agreement for Pizza Planet and recorded the related revenue. The job started in August.
  2. Conklin provides weekly service visits to the local C.J. Nickel department store to check and maintain various pieces of computer printing equipment. On December 31, Conklin recorded revenue for the visits completed during December. The cash will not be received until January.
  3. Conklin’s salaried employees are paid on the last day of every month. On December 31, Conklin recorded the payment Of December salaries.
  4. Conklin’s hourly wage employees are paid every Friday. On 31, Conklin recorded as payable the wages for the first three working days of the week in which the year ended.
  5. On December 31, Conklin recorded the receipt of a shipment of office supplies from Office Supplies Inc. to be paid for in January.
  6. On December 31, Conklin recorded the estimated use of supplies for the year. The supplies were purchased for cash earlier in the year.
  7. Early in December, Conklin was in by Parker Enterprises for 2 months of weekly visits. Conklin recorded the advance payment as a liability. On December 31 , Conklin recorded revenue for the service visits to Parker Enterprises that were completed during December.
  8. On December 3 1, Conklin recorded depreciation expense on office equipment for the year.

Required:

Indicate whether each entry is an adjusting entry or a regular journal entry, and, if it is an adjusting entry, identify it as one of the following types: (1) revenue recognized before collection of cash, (2) expense recognized before payment of cash, (3) revenue recognized after collection of cash, or (4) expense recognized after payment of cash.

To determine

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
  • To Identify:

If the transaction is adjusting or regular journal entry and type of the adjusting entry (if any).

Explanation

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period
  • The transactions are identified as adjusting or regular journal entry and type of the adjusting entry as follows:

      TransactionType of entry Type of adjusting entry
      a...

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