AFM101 Chapter Notes - Chapter 4: Deferral, Financial Statement, Retained Earnings

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amberkangaroo617

8 Oct 2013

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Donna Psutka

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AFM101 Full Course Notes

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Chapter 4: adjustments, financial statements and the quality of earnings. Office services clients paid fees in cash for future service. Sold merchandise on account but hasn"t recorded the sales invoice (jan 31) Deferred expenses: paid in advance for rent for the month. Accrued expense: received a utility bill at the end of the month. Accrued liabilities (trade payable: income taxes if income tax rate is 25% and pretax profit is , income tax expense is. An item is material to the financial statements if the omission or misstatement of this item would influence or change a decision. To transfer profit or loss to retained earnings. Establish a zero balance in each of the temporary (nominal) accounts to start accumulation in the next accounting period. Income summary: close income summary (this is for a net income, for net loss, flip accounts)

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

1. Using accrual accounting, revenues are recorded

a. when cash is received without regard to when the services are performed or products have been delivered to customers.

b. when a service has been performed or products have been delivered to customers without regard to when cash is received.

c. when cash is received at the time services are performed or products have been delivered to customers only if cash is received.

d.after the services are performed or products have been delivered to customers.

2. Deferred revenue is revenue that is

a. earned and the cash has been received.

b. earned but the cash has not been received.

c. not earned and the cash has not been received.

d. not earned but the cash has been received.

3. Adjusting entries always include

a. only income statement accounts.

b. only balance sheet accounts the cash account.

c. at least one income statement account and one balance sheet account.

4. Which of the following is considered to be an accrued expense?

a. a computer technician has installed the latest software updates and was paid on the same day

b. a computer technician has been paid in advance to install software updates as they become available

c. a computer technician has just signed an agreement with you regarding pricing for future work

d. a computer technician has installed the latest software updates, but you have not received an invoice or made payment

ochreplatypus211

Reliable Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Reliable Repairs & Service

UNADJUSTED TRIAL BALANCE

April 30, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	10,350.00
2	Accounts Receivable	67,500.00
3	Supplies	16,200.00
4	Equipment	116,100.00
5	Accounts Payable		15,750.00
6	Unearned Fees		18,000.00
7	Karin Bickle, Capital		121,500.00
8	Karin Bickle, Drawing	13,500.00
9	Fees Earned		294,750.00
10	Wages Expense	94,500.00
11	Rent Expense	72,000.00
12	Utilities Expense	51,750.00
13	Miscellaneous Expense	8,100.00
14	Totals	450,000.00	450,000.00

For preparing the adjusting entries, the following data were assembled:

a.	Fees earned but unbilled on April 30 were $9,850.
b.	Supplies on hand on April 30 were $4,660.
c.	Depreciation of equipment was estimated to be $6,470 for the year.
d.	The balance in unearned fees represented the April 1 receipt in advance for services to be provided. During April, $15,000 of the services were provided.
e.	Unpaid Wages accrued on April 30 were $5,200.

	Required:
1.	Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.
2.	Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.
3.	Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.
4.	Determine the effect of the adjusting entries on Karin Bickle, Capital.

Chart of Accounts

CHART OF ACCOUNTS

Reliable Repairs & Service

General Ledger

	ASSETS
11	Cash
12	Accounts Receivable
13	Supplies
16	Equipment
17	Accumulated Depreciation-Equipment

	LIABILITIES
21	Accounts Payable
22	Wages Payable
23	Unearned Fees

	EQUITY
31	Karin Bickle, Capital
32	Karin Bickle, Drawing

	REVENUE
41	Fees Earned

	EXPENSES
51	Wages Expense
52	Rent Expense
53	Supplies Expense
54	Depreciation Expense
56	Utilities Expense
59	Miscellaneous Expense

Journal

1. Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11

Final Questions

2. Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.

Before Adjusting Entries

1	Revenues
2	Expenses
3	Net income

3. Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.

After Adjusting Entries

1	Revenues
2	Expenses
3	Net income

4. Determine the effect of the adjusting entries on Karin Bickle, Capital.

The capital account by

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AFM101 Chapter Notes - Chapter 4: Deferral, Financial Statement, Retained Earnings

AFM101 Full Course Notes

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