ACCT 115 Chapter Notes - Chapter 4: Porton, Deferred Income, Deferral

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silvergiraffe603

18 May 2016

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Needed at the end of each accounting period to make certain that appropriate amounts of revenue and expense are reported in the company"s income statement. System: converting assets to expenses: a cash expenditure (or cost) that will benefit more than one accounting period usually is recorded by debiting an asset account (supplies, unexpired insurance, etc. ) and by crediting cash. The asset account created actually represents the deferral (or the postponement) of an expense. In each future period that benefits from the use of this asset, an adjusting entry is made to allocate a portion of the asset"s cost from the balance sheet to the income statement as an expense. This adjusting entry is recorded by debiting the appropriate expense account (for example, supplies expense or. Insurance expense) and crediting the related asset account: converting liabilities to revenue: business may collect cash in advance for services to be rendered in future accounting periods.

Related Questions

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.

On March 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Potomac Realty:

a.The supplies account balance on March 31 is $5,620, the supplies on hand on March 31 are $1,290.

b.The unearned rent account balance on March 31 is $5,000 representing the receipt of an advance payment on March 1 of four months’ rent from tenants.

c.Wages accrued but not paid at March 31 are $2,290

d.Fees accrued but unbilled on March 31 are $16,825.

e.Depreciation of office equipment is $4,600.

CHART OF ACCOUNTS Potomac RealtyGeneral Ledger
	ASSETS
11	Cash
12	Accounts Receivable
13	Supplies
14	Prepaid Insurance
15	Land
16	Equipment
17	Accumulated Depreciation-Office Equipment
19	Accumulated Depreciation-Automobiles

	LIABILITIES
21	Accounts Payable
22	Unearned Rent
23	Wages Payable
24	Taxes Payable

	EQUITY
31	Owner, Capital
32	Owner, Drawing

	REVENUE
41	Fees Earned
42	Rent Revenue

	EXPENSES
51	Advertising Expense
52	Insurance Expense
53	Rent Expense
54	Wages Expense
55	Supplies Expense
56	Utility Expense
57	Depreciation Expense
59	Miscellaneous Expense

	Required:
1.	Journalize the adjusting entries required on March 31. Refer to the Chart of Accounts for the exact wording of account titles.
2.	What is the difference between adjusting entries and correcting entries?
	A) Both adjusting entries and correcting entries are a planned part of the accounting process.
	B) Adjusting entries are a planned part of the accounting process, correcting entries are not planned but arise when necessary to correct errors.
	C) Both adjusting entries and correcting entries are not a planned part of the accounting process.
	D) Correcting entries are a planned part of the accounting process, adjusting entries are not planned but arise when necessary to adjust errors.

brownfox469

The expense account, Salaries Expense, has an unadjusted balanceof $151,000 on Thursday, December 31,2017.

The company operates five days a week with a daily payroll of$4,000. Employees are paid every Saturday for the workweek justcompleted (Monday through Friday). Determine the correct endingbalance in Salaries Payable and Salaries Expense after the correctadjusting entry is made at year end:

	A.	Salaries Payable SalariesExpense $4,000 $155,000
	B.	SalariesPayable SalariesExpense $4,000 $147,000
	C.	SalariesPayable SalariesExpense $16,000 $16,000
	D.	SalariesPayable SalariesExpense $16,000 $135,000
	E.	SalariesPayable SalariesExpense $16,000 $167,000

1 points

QUESTION 7

Answer the following statements as true or false, then selectthe correct multiple -choice answer:

1. If dividends are declared during the year thecompany would close the dividend account by debiting retainedearnings and crediting the dividend account.

2. A company that forgets to recognizedepreciation for the year understates its income and assets.

3. Prepaid insurance expense will havea zero balance on the after closing trial balance.

4. Retained earnings on an adjustedtrial balance is the beginning retained earnings for theperiod.

	A.	True, False, False, False
	B.	False, True, True, False
	C.	True, False, False, True
	D.	False, True, True, True
	E.	True, True, False, False

1 points

QUESTION 8

Mark each of these items as an accrued asset, accrued liability,deferred expense or deferred revenue, then select the correctmultiple-choice answer.

________ Interest of $500 on a notereceivable was earned at year âend, although collection of theinterest is not due until the following year.

________ At year-end, cash of $1,000 wascollected for a job to be performed in the following year.

________ Office supplies were purchasedduring the year for $700, and $100 of them remained on hand atyear-end.

________ At year-end, wages payable of $2,900had not been recorded or paid.

	A.	Accrued Asset, Accrued Liability, Deferred Revenue, DeferredExpense
	B.	Accrued Asset, Deferred Revenue, Deferred Expense, AccruedLiability
	C.	Deferred Revenue, Deferred Expense, Accrued Asset, AccruedLiability
	D.	Deferred Expense, Accrued Asset, Accrued Liability, DeferredRevenue
	E.	Deferred Revenue, Accrued Liability, Accrued Asset, DeferredExpense

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ACCT 115 Chapter Notes - Chapter 4: Porton, Deferred Income, Deferral

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