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Lecture 8

COMMERCE 1AA3 Lecture Notes - Lecture 8: Accrual, 2 On, Interest Rate


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Emad Mohammad
Lecture
8

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Commerce 1AA3 : Financial Accounting C03
Instructor : Emad Mohammad
September 22th 2016
Prepayments - Example 4
On June 1, 2013, Chocolate INC., receives $36000 in newspaper subscriptions for the next
year, effective August 1, 2013. Prepare the adjusting entry as of December 31, 20113
June 1, 2013
Cash 36 000
Unearned Service Revenue 36 000
December 31, 2013
Unearned Service Revenue 15 000
Service Revenue 15 000
Accrued Expenses - unrecorded expenses, that have been incurred but not paid or record
Accruals - Example 1
If Chocolate INC’s 5-day weekly payroll was $6000, and the year ended on a Wednesday.
Chocolate INC pays and records wages each Friday. Prepare the adjusting entry as of fiscal
year end.
December 31, 2013
Wages Expense 3600
Wages Payable 3600
Wages - person is paid per hours
Salary - person is not paid more if worked under time or overtime
What is the transaction on Friday?
Wages Payable 3600
Wages Expense 2400
Cash 6000
Accruals - Example 2
On September 1,2013, ChocolateINC. put $10 000 in a saving account for one year. The
interest rate is 12% receivable every six months, on March 1 and September 1. Prepare the
adjusting entry on Dec.31,2013
Interest rate is always annual
Original Entry
September 1, 2013
Deposit receivable 10 000
Cash 10 000
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