Effects of adjusting journal entries on income statement accounts

(Learning Objectives 2 & 3) 20–25 min.

Troy, Corp., completed the following selected transactions and prepared these adjusting entries during August:

Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses, or have no effect on revenues or expenses.
If revenues or expenses are affected, give the amount of the impact on revenues or expenses for August. Use the following format for your answer.

2. Compute August net income or net loss under the accrual basis of accounting.
3. State why the accrual basis of accounting results in an accurate measurement of income.AppendixLO1

Transcribed Image Text:

Aug 1 3 6 Prepaid insurance for August through October, $3,000. Performed service on account, $3,500. Purchased office furniture on account, $350. Paid property tax expense, $900. 12 Purchased office equipment for cash, $1,400. 23 Performed services and received cash, $2,400. Collected $300 on account. 26 Paid the account payable from the August 6 transaction. 30 Paid salaries expense, $1,300. 31 Recorded an adjusting entry for August insurance expense related to the August 1 transaction. 31 Recorded an adjusting entry for unearned revenue now earned, $800.