Concept explainers
S3-5 Identifying types of
Learning Objective 3 |
A select list of transactions for Anuradha’s Goals follows.
Apr. 1 |
Paid six months of rent, $4,800. |
10 |
Received $1,200 from customer for six-month service contract that began April 1. |
15 |
Purchased a computer for $1,000. |
18 |
Purchased $300 of office supplies on account. |
30 |
Work performed but not yet billed to customer, $500. |
30 |
Employees earned $600 in salaries that will be paid May 2. |
For each transaction, identify what type of adjusting entry would be needed. Select from the following four types of adjusting entries, deferred expense, deferred revenue, accrued expense, and accrued revenue.
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Chapter 3 Solutions
Horngren's Accounting: The Managerial Chapters, Student Value Edition (12th Edition)
Additional Business Textbook Solutions
Construction Accounting And Financial Management (4th Edition)
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Financial Accounting
Principles of Accounting Volume 1
Principles of Accounting Volume 2
- (Learning Objective 3: Adjust the accounts) Answer the following questions aboutprepaid expenses:a. On March 1, Meadow Tree Service prepaid $7,200 for six months’ rent. Give theadjusting entry to record rent expense at March 31. Include the date of the entry and anexplanation. Then post all amounts to the two accounts involved, and show their balancesat March 31. Meadow adjusts the accounts only at March 31, the end of its fiscal year.b. On March 1, Meadow Tree Service paid $1,050 for supplies. At March 31, Meadow has$400 of supplies on hand. Make the required journal entry at March 31. Then post allamounts to the accounts and show their balances at March 31. Assume no beginningbalance in suppliesarrow_forwardQuiz for Chapter 3 P3-67A (Learning Objective 3: Adjust the accounts) Journalize the adjusting entry needed on December 31, end of the current accounting period, for each of the following independent cases affecting Green Corp. Include an explanation for each entry. a. Details of Prepaid Insurance are shown in the account: Prepaid Insurance Jan 1 Bal 1,050 Mar 31 4,800 Green prepays insurance on March 31 each year. At December 31, $1,200 is still prepaid. b. Green pays employees each Friday. The amount of the weekly payroll is $5,800 for a five-day work week. The current accounting period ends on Tuesday. c. Green has a note receivable. During the current year, Green has earned accrued interest revenue of $600 that it will collect next year. d. The beginning balance of supplies was $2,300. During the year, Green purchased supplies costing $6,100, and at December 31 supplies on hand total $2,100. e. Green is providing services for Manatee Investments, and the owner of Manatee paid Green…arrow_forwardS3-5. (Learning Objective 2: Apply the revenue and expense recognition principles)Identify the accounting concept or principle that gives the most direction on how to account foreach of the following situations:a. A utility bill is received on December 27 and will be paid next year. When should thecompany record utility expense?b. A physician performs a surgical operation and bills the patient’s insurance company. Itmay take three months to collect from the insurance company. Should the physicianrecord revenue now or wait until cash is collected?c. March has been a particularly slow month, and the business will have a net loss for thesecond quarter of the year. Management is considering not following its customarypractice of reporting quarterly earnings to the public.d. Salary expense of $48,000 is accrued at the end of the period to measure incomeproperly.e. A construction company is building a highway system, which will take four years.When should the company record the revenue it…arrow_forward
- 3-21A. (Learning Objective 3: Adjust the accounts) Jenkins Rentals Company faced thefollowing situations. Journalize the adjusting entry needed at December 31, 2020, for eachsituation. Consider each fact separately.a. The business has interest expense of $3,100 that it must pay early in January 2021.b. Interest revenue of $4,400 has been earned but not yet received.c. On July 1, 2020, when the business collected $14,200 rent in advance, it debited Cashand credited Unearned Rent Revenue. The tenant was paying for two years’ rent.d. Salary expense is $5,700 per day—Monday through Friday—and the business paysemployees each Friday. This year, December 31 falls on a Thursday.e. The unadjusted balance of the Supplies account is $3,100. The total cost of supplies onhand is $1,200.f. Equipment was purchased on January 1 of this year at a cost of $140,000. The equipment’s useful life is five years. There is no residual value. Record depreciation for thisyear and then determine the equipment’s…arrow_forwardS3-12. (Learning Objective 3: Adjust the accounts for prepaid rent) Due to the terms ofits lease, Hawke Services, Inc., pays the rent for its new office space in one annual payment of$26,800 on August 1, 2018. The lease covers the period of August 1, 2018, through July 31,2019. Hawke Services has a year-end of December 31. Assume that Hawke Services had noother prepaid rent transactions, nor did it have a Prepaid Rent beginning balance in 2018. Givethe journal entries that Hawke Services would make for (a) the annual rent payment of $26,800on August 1 and (b) the adjusting entry for rent expense on December 31, 2018. What is thebalance of Prepaid Rent at December 31, 2018?arrow_forwardS3-9. (Learning Objective 3: Adjust the accounts for interest expense) Trent Restaurantborrowed $110,000 on October 1 by signing a note payable to Hometown Bank. The interestexpense for each month is $825. The loan agreement requires Trent to pay interest on January 2for October, November, and December.1. Make Trent’s adjusting entry to accrue monthly interest expense at October 31, atNovember 30, and at December 31. Date each entry and include its explanation.2. Post all three entries to the Interest Payable account. You do not need to calculate thebalance of the account at the end of each month.3. Record the payment of three months’ interest on January 2.arrow_forward
- P3-66B. (Learning Objective 1: Explain how accrual accounting differs from cash-basisaccounting) Westchester Consulting had the following selected transactions in May:May 1 Prepaid insurance for May through July, $2,250.4 Purchased office furniture for cash, $4,000.5 Performed services and received cash, $1,000.8 Paid advertising expense, $300.11 Performed service on account, $3,500.19 Purchased computer on account, $2,000.24 Collected for May 11 service.26 Paid account payable from May 19.29 Paid salary expense, $1,000.31 Adjusted for May insurance expense (see May 1).31 Earned revenue of $1,000 that was collected in advance back31 Recorded May depreciation expense on all fixed assets, $108.in April.Requirements1. Show how each transaction would be handled (in terms of recognizing revenues andexpenses) using the cash basis and the accrual basis.2. Calculate May income (loss) before tax under each accounting method.3. Indicate which measure of net income or net loss is preferable. Use…arrow_forwardS3-3. (Learning Objective 2: Apply the revenue and expense recognition principles) Asthe controller of Chardon Consulting, you have hired a new employee, whom you must train.She objects to making an adjusting entry for accrued salaries at the end of the period. She reasons, “We will pay the salaries soon. Why not wait until payment to record the expense? In theend, the result will be the same.” Write a reply to explain to the employee why the adjustingentry is needed for accrued salary expense.arrow_forwardP3-58A. (Learning Objective 1: Explain how accrual accounting differs from cash-basisaccounting) Berkley Consulting had the following selected transactions in July:July 1 Prepaid insurance for July through September, $3,900.4 Purchased office furniture for cash, $3,000.5 Performed services and received cash, $1,800.8 Paid advertising expense, $300.11 Performed service on account, $3,100.19 Purchased computer on account, $1,600.24 Collected for July 11 service.26 Paid account payable from July 19.29 Paid salary expense, $1,100.31 Adjusted for July insurance expense (see July 1).31 Earned revenue of $400 that was collected in advance back31 Recorded July depreciation expense on all fixed assets, $408.in June.Requirements1. Show how each transaction would be handled (in terms of recognizing revenues andexpenses) using the cash basis and the accrual basis.2. Calculate July income (loss) before tax under each accounting method.3. Indicate which measure of net income or net loss is…arrow_forward
- E3-31B. (Learning Objectives 2, 3: Apply the revenue and expense recognition principles;adjust the accounts) Englewood Corporation experienced four situations for its supplies.Calculate the amounts that have been left blank for each situation. For situations 1 and 2,journalize the needed transaction. Consider each situation separately.Beginning supplies.....................................Purchases of supplies during the year........Total amount to account for.....................Ending supplies.........................................Supplies Expense .......................................3$ 700??(700)$ 1,3001$1,500?2,900(990)$1,910$ 700400?(900)$ ?2$ 1,0008001,800?$ 1,600Situation 4E3-32B. (Learning Objective 3: Adjust the accounts) Thornton Company faced the following situations. Journalize the adjusting entry needed at December 31, 2020, for each situation.Consider each fact separately.a. The business has interest expense of $3,800 that it must pay early in January 2021.b. Interest…arrow_forwardE3-24A. (Learning Objectives 3, 4: Adjust the accounts; construct the financial statements)The adjusted trial balances of Patterson Corporation at August 31, 2018, and August 31, 2017,include these amounts (in millions):2018 2017Accounts receivable............................................................... $430 $210Prepaid insurance .................................................................. 330 400Accrued liabilities payable (for other operating expenses) ..... 710 640Patterson Corporation completed these transactions (in millions) during the year endedAugust 31, 2018.Collections from customers......................................... $20,400Payment of prepaid insurance ..................................... 470Cash payments for other operating expenses............... 4,000Calculate the amount of sales revenue, insurance expense, and other operating expenses toreport on the income statement for the year ended August 31, 2018. Assume all sales are onaccount.arrow_forward(Learning Objective 4: Journalize and post transactions) Orman Consulting performed services for a client who could not pay immediately. Orman expected to collect the$4,600 the following month. A month later, Orman received $2,100 cash from the client.1. Record the two transactions on the books of Orman Consulting. Include an explanation foreach transaction.2. Post to these T-accounts: Cash, Accounts Receivable, and Service Revenue. Compute eachaccount balance and denote it as Bal.arrow_forward
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