Concept explainers
(a)
Accrual basis of accounting:
In accrual Basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly the expenses are recognized for the accounting period, in which the business incurred expenses even if cash is not exchanged.
To identify: The accounts of Company A, which provide evidence that Company A uses accrual accounting.
The income statement account of Company A, which would be affected by the adjustments process.
(b)
To identify: The accounts of Company W, which provide evidence that Company W uses accrual accounting.
The accounts of Company W, which provide evidence that Company W uses accrual accounting.
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- Baker Company includes the following balance sheet accounts. Identify the accounts that might require adjustment. For each account that requires adjustment, indicate (1) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the related account in the adjustment. (a) Prepaid Insurance.- (b) Accounts Receivable (c) Accumulated Depreciation—Equipment. (d) Notes Payable. (e) Equipment. (f) Interest Payable. (g) Unearned Service Revenue.arrow_forwardDirections: Enter the adjustments noted below to the Merchandise Corporation Worksheet Adjustments columns in the file provided. Calculate the Adjusted Trial Balance for all accounts, and total all columns through the Adjusted Trial Balance, so that debits = credits. Move account balances to the Income Statement and Balance Sheet columns as required. Calculate Net Income Before Income Taxes, ensure debits = credits. Sporting Goods Merchandise Corporation Adjustments are: Supplies-Office - ending supplies count is 1,500. Supplies-Store - ending supplies count is $1,000 Prepaid Insurance used during the period was $4,500 A physical merchandise inventory count was taken on Dec. 31st and the ending inventory was $70,000. Uncollectible accounts is estimated to be 2% of the total sales on account (Account Receivable) for the period. The office equipment depreciated by $5,000 and store equipment depreciated by $6,000arrow_forwardThe entry to adjust for the cost of supplies used during the accounting period is: a.) debit Supplies; credit Stockholders' Equity b.) debit Supplies Expense; credit Supplies c.) debit Accounts Payable; credit Supplies d.) debit Stockholders' Equity; credit Suppliesarrow_forward
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