1.
Introduction: Prepaid expense refers to the expense relating to the future periods paid in advance by the company. It is treated as a current expense till the time expense becomes due and once it becomes due, it is shown as an expense in the income statement.
To compute: The monthly cost of insurance policy.
2.
Introduction: Prepaid expense refers to the expense relating to the future periods paid in advance by the company. It is treated as a current expense till the time expense becomes due and once it becomes due, it is shown as an expense in the income statement.
To prepare: The
3.
Introduction: Prepaid expense refers to the expense relating to the future periods paid in advance by the company. It is treated as a current expense till the time expense becomes due and once it becomes due, it is shown as an expense in the income statement.
To prepare: The adjusting journal entry on December 31.
4.
Introduction: Prepaid expense refers to the expense relating to the future periods paid in advance by the company. It is treated as a current expense till the time expense becomes due and once it becomes due, it is shown as an expense in the income statement.
Whether net income for year ended December 31, 2016 will be understated or overstated if
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Financial Accounting: The Impact on Decision Makers
- Interest Payable—Quarterly Adjustments Glendive takes out a 12%, 90-day, $100,000 loan with Second State Bank on March 1, 2016. Assume that Glendive prepares adjusting entries only four times a year: on March 31, June 30, September 30, and December 31. Required Prepare the journal entry on March 1, 2016. Prepare the adjusting entry on March 31, 2016. Prepare the entry on May 30, 2016, when Glendive repays the principal and interest to Second State Bank.arrow_forwardAdjusting Entries Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for March 2016: Kretz Corporation takes out a 90-day, 8%, $15,000 note on March 1, 2016, with interest and principal to be paid at maturity. The asset account Office Supplies on Hand has a balance of $1,280 on March 1, 2016. During March, Kretz adds $750 to the account for purchases during the period. A count of the supplies on hand at the end of March indicates a balance of $1,370. The company purchased office equipment last year for $62,600. The equipment has an estimated useful life of six years and an estimated salvage value of $5,000. The companys plant operates seven days per week with a daily payroll of $950. Wage earners are paid every Sunday. The last day of the month is Thursday, March 31. The company rented an idle warehouse to a neighboring business on February 1, 2016, at a rate of $2,500 per month. On this date, Kretz Corporation credited Rent Collected in Advance for six months rent received in advance. On March 1, 2016, Kretz Corporation credited a liability account, Customer Deposits, for $4,800. This sum represents an amount that a customer paid in advance and that Kretz will earn evenly over a four-month period. Based on its income for the month, Kretz Corporation estimates that federal income taxes for March amount to $3,900. Required For each of the preceding situations, prepare in general journal form the appropriate adjusting entry to be recorded on March 31, 2016.arrow_forwardInterest Receivable On June 1, 2016, MicroTel Enterprises lends $60,000 to MaxiDriver Inc. The loan will be repaid in 60 days with interest at 10%. Required Prepare the journal entry on MicroTels books on June 1, 2016. Prepare the adjusting entry on MicroTels books on June 30, 2016. Prepare the entry on MicroTels books on July 31, 2016, when MaxiDriver repays the principal and interest.arrow_forward
- Unearned Revenue Jennifers Landscaping Services signed a $400-per-month contract on November 1, 2019, to provide plant watering services for Lola Inc.s office buildings. Jennifers received 4 months' service fees in advance on signing the contract. Required: 1. Prepare Jennifers journal entry to record the cash receipt for the first 4 months. 2. Prepare Jennifers adjusting entry at December 31, 2019. 3. CONCEPTUAL CONNECTION How would the advance payment (account(s) and amounts(s)] be reported in Jennifers December 31, 2019, balance sheet? How would the advance payment [account(s) and amount(s)] be reported in Lolas December 31, 2019, balance sheet?arrow_forwardPrepaid Rent—Quarterly Adjustments On September 1, Northhampton Industries signed a six-month lease for office space, which is effective September 1. Northhampton agreed to prepay the rent and mailed a check for $12,000 to the landlord on September 1. Assume that Northhampton prepares adjusting entries only four times a year: on March 31, June 30, September 30, and December 31. Required Compute the rental cost for each full month. Prepare the journal entry to record the payment of rent on September 1. Prepare the adjusting entry on September 30. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? by what amount?arrow_forwardRent Receivable Hudson Corp. has extra space in its warehouse and agrees to rent it out to Stillwater Company at the rate of $2,000 per month. The space was made available to Stillwater beginning on September 1. Under the terms of the agreement, Stillwater pays the months rent on the fifth day after the end of the month. Assume that Hudson prepares adjusting entries at the end of each month. Required How much revenue should Hudson record in September? How much revenue should Hudson record in October? Prepare the necessary entries on Hudsons books during the month of October.arrow_forward
- JOURNAL ENTRIES (ACCRUED INTEREST RECEIVABLE) At the end of the year, the following interest is earned, but not yet received. Record the adjusting entry in a general journal. Interest on 6,000, 60-day, 5.5% note (for 24 days) 22.00 Interest on 9,000, 90-day, 6% note (for 12 days) 18.00 40.00arrow_forwardWrite-Off of Uncollectible Accounts King Enterprises had 27 customers utilizing its financial planning services in 2019. Each customer paid King $25,000 for receiving Kings assistance. King estimates that 2% of its $675,000 credit sales in 2019 will be uncollectible. During 2020, King wrote off $2,700 related to services performed in 2019. Required: 1. Prepare the journal entry to record the defaulted balance. 2. Prepare the adjusting entry to record the bad debt expense for 2019.arrow_forwardDallas Company loaned to Ewing Company on December 1, 2019. Ewing will pay Dallas $720 of interest ($60 per month) on November 30, 2020. Dallass adjusting entry at December 31, 2019, is: a. Interest Expense ........... 60 c. Interest Receivable ....... 60 Cash ......................... 60 Interest Income ........ 60 b. Cash ............................ 60 d. No adjusting entry is required. Interest Income ........ 60arrow_forward
- Hurd Inc. prepays rent every 3 months on March 1, June 1, September 1, and December 1. Rent for the 3 months totals S3,600. On December 31, 2019, Hurd will report Prepaid Rent of: a. $0 b. $1,200 c. $2,400 d. $3,600arrow_forwardAdjusting Entries Exercise 3-52 Allentown Services Inc. is preparing adjusting entries for the year ending December 31, 2019. The following data are available: Interest is owed at December 31, 2019, on a 6-month, 8% note. Allentown borrowed $120,ooo from NBD on September 1, 2019. Allentown provides daily building maintenance services to Mack Trucks for a quarterly fee of $2,700 payable on the fifteenth of the month following the end of each quarter. No entries have been made for the services provided to Mack Trucks during the quarter ended December 31, and the related bill will not be sent until January 15, 2020. At the beginning of 2019, the cost of office supplies on hand was $1,220. During 2019, office supplies with a total cost of $6,480 were purchased from Office Depot and debited to office supplies inventory. On December 31, 2019, Allentown determined the cost of office supplies on hand to be $970. On September 23, 2019, Allentown received a $7,650 payment from Bethlehem Steel for 9 months of maintenance services beginning on October 1, 2019. The entire amount was credited to unearned service revenue when received. Required: Prepare the appropriate adjusting entries at December 31, 2019. CONCEPTUAL CONNECTION What would be the effect on the balance sheet and the income statement if the accountant failed to make the above adjusting entries?arrow_forwardUnearned Rent Revenue Mannion Property Management leases commercial properties and expects its clients to pay rent on a monthly basis. A new client signs a 4-year lease with a yearly rent of $420,000 and agrees to pay the first 6 months in advance. Required: Make the journal entry to record the following transactions. 1. The customers prepayment of 6 months' rent 2. The necessary adjusting entry after 1 month has passedarrow_forward
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