ACCT 301 Lecture Notes - Lecture 4: Financial Statement, Accrual, Deferral

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31 Oct 2016

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State whether each situation is a prepaid expense (pe), unearned revenue (ur), accrued revenue (ar) or an accrued expense (ae). Property taxes that have been incurred but that have not yet been paid or recorded amount to . Legal fees of ,000 were collected in advance. By year end 60 percent were still unearned. Prepaid insurance had a balance prior to adjustment. By year end, 40 percent was still unexpired. Unpaid salaries earned by year end but not yet paid or recorded amounted to ,200. Identify the impact on the balance sheet for that month if the following information is not used to adjust the accounts. Interest accrues on notes payable at the rate of per month. Plant and equipment are depreciated at the rate of ,200 per month. Assets overstated and stockholders" equity overstated by ,000. Liabilities understated and stockholders" equity overstated by . Assets overstated and stockholders" equity overstated by .

Related Questions

Hart Corporation encounters the following situations:

Identify what type of adjusting entry (prepaid expense, unearnedrevenue, accrued expense, or accrued revenue) is needed in eachsituation at December 31, 2015.

-A.B.C.D.	Hart collects $1,300 from a customer in 2015 for services to beperformed in 2016.
-A.B.C.D.	Hart incurs utility expense which is not yet paid in cash orrecorded.
-A.B.C.D.	Hart's employees worked 3 days in 2015 but will not be paiduntil 2016.
-A.B.C.D.	Hart performs services for customers but has not yet receivedcash or recorded the transaction.
-A.B.C.D.	Hart paid $2,400 rent on December 1 for the 4 months startingDecember 1.
-A.B.C.D.	Hart received cash for future services and recorded a liabilityuntil the service was performed.
-A.B.C.D.	Hart performed consulting services for a client in December2015. On December 31, it had not billed the client for servicesperformed of $1,200.
-A.B.C.D.	Hart paid cash for an expense and recorded an asset until theitem was used up.
-A.B.C.D.	Hart purchased $900 of supplies in 2015; at year-end, $400 ofsupplies remain unused.
-A.B.C.D.	Hart purchased equipment on January 1, 2015; the equipment willbe used for 5 years.
-A.B.C.D.	Hart borrowed $10,000 on October 1, 2015, signing an 8% one-yearnote payable.

A.	Unearned Revenue
B.	Accrued Expense
C.	Accrued Revenue
D.	Prepaid Expenses

tancod723

NEED ANSWERS ASAP

Question 23

If a resource has been consumed but a bill hasnot been received at the end of the accountingperiod, then

		an expense should be recorded when the bill is received.
		an expense should be recorded when the cash is paid out.
		an adjusting entry should be made recognizing the expense.
		it is optional whether to record the expense before the bill isreceived.

3 points

Question 24

Prepaid expenses are

		paid and recorded in an asset account before they are used orconsumed.
		paid and recorded in an asset account after they are used orconsumed.
		incurred but not yet paid or recorded.
		incurred and already paid or recorded.

3 points

Question 25

If a business has received cash in advance of services performedand credits a liability account, the adjusting entry needed afterthe services are performed will be

		debit Unearned Service Revenue and credit Cash.
		debit Unearned Service Revenue and credit Service Revenue.
		debit Unearned Service Revenue and credit Prepaid Expense.
		debit Unearned Service Revenue and credit AccountsReceivable.

3 points

Question 26

The preparation of adjusting entries is

		straight forward because the accounts that need adjustment willbe out of balance.
		often an involved process requiring the skills of aprofessional.
		only required for accounts that do not have a normalbalance.
		optional when financial statements are prepared.

3 points

Question 27

On January 1 of the current year, Doolittle Company purchasedfurniture for $7,560. The company expects to use the furniture for3 years. The asset has no salvage value. The book value of thefurniture at December 31of this year is

		$0.
		$2,520.
		$5,040.
		$7,560.

3 points

Question 28

Husker Du Supplies Inc. purchased a 12-month insurance policy onMarch 1 of the current year for $1,800. At March 31, the adjustingjournal entry to record expiration of this asset will include a

		debit to Prepaid Insurance and a credit to Cash for $1,800.
		debit to Prepaid Insurance and a credit to Insurance Expense for$200.
		debit to Insurance Expense and a credit to Prepaid Insurance for$150.
		debit to Insurance Expense and a credit to Cash for $150.

Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31.

A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,280. No interest expense has yet been recorded.

Depreciation of the firmâs office building is based on an estimated life of 30 years. The building was purchased four years ago for $300,000.

Accrued, but unbilled, revenue during December amounts to $54,000.

On March 1, the firm paid $1,800 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance.

The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $2,700 had actually been earned by the firm.

The companyâs policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $2,400.

a. Record the necessary adjusting journal entries on December 31.

b. By how much did Sweeney & Allenâs net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.)

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ACCT 301 Lecture Notes - Lecture 4: Financial Statement, Accrual, Deferral

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