a. The company received its electric bill on December 20 for $275 but will not pay it until January 5. (Use the Utilities Payable account.) b. Stewart purchased a nine-month boat insurance policy on November 1 for $1,800. Stewart recorded a debit to Prepaid Insurance. c. As of December 31 , Stewart had earned $2,500 of charter revenue that has not been recorded or received. d. Stewart's fishing boat was purchased on January 1 at a cost of $50,000. Stewart expects to use the boat for ten years and that it will have a residual value of $4,000. Determine annual depreciation assuming the straight-line depreciation method is used. e. On October 1, Stewart received $7,500 prepayment for a deep-sea fishing charter to tako nlaco in Nocombor As of Decomher 31 Stowart hac Requirements 1. Journalize the adjusting entries needed on December 31 for Stewart Fishing Charters. Assume Stewart records adjusting entries only at the end of the year. 2. If Stewart had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Read the requirements. then credits. Select the explanation on the last line of the journal entry table.) Recall that prepaid expenses are advance payments of expenses such as Prepaid Insurance and Prepaid Rent. When a business prepays an expense - insurance, for example-it can debit an asset account (Prepaid Insurance). The asset, however, may be so short-lived that it will expire in the current accounting period-within one year or less. Thus, the accountant may decide to debit the prepayment to an expense account at the time of payment. We're told to assume that Henderson recorded a debit to Prepaid Insurance when the cash was paid for the insurance. To record the expense (which has occurred with the passage of time from November 1 through December 31 ), we'll reduce (credit) the prepaid asset account and will increase (debit) the appropriate expense account. Let's calculate the amount of insurance expense needed for the adjusting entry at year end. Using the amount calculated above, record adjusting entry b. This adjustment will reduce the asset and increase the expense. Joumalize the entry. a. The company received its electric bill on December 20 for $275 but will not pay it until January 5. (Use the Utilities Payable account.) b. Stewart purchased a nine-month boat insurance policy on November 1 for $1,800. Stewart recorded a debit to Prepaid Insurance. c. As of December 31 , Stewart had earned $2,500 of charter revenue that has not been recorded or received. d. Stewart's fishing boat was purchased on January 1 at a cost of $50,000. Stewart expects to use the boat for ten years and that it will have a residual value of $4,000. Determine annual depreciation assuming the straight-line depreciation method is used. e. On October 1, Stewart received $7,500 prepayment for a deep-sea fishing charter to tako nlaco in Nocombor As of Decomher 31 Stowart hac Requirements 1. Journalize the adjusting entries needed on December 31 for Stewart Fishing Charters. Assume Stewart records adjusting entries only at the end of the year. 2. If Stewart had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Read the requirements. then credits. Select the explanation on the last line of the journal entry table.) Recall that prepaid expenses are advance payments of expenses such as Prepaid Insurance and Prepaid Rent. When a business prepays an expense - insurance, for example-it can debit an asset account (Prepaid Insurance). The asset, however, may be so short-lived that it will expire in the current accounting period-within one year or less. Thus, the accountant may decide to debit the prepayment to an expense account at the time of payment. We're told to assume that Henderson recorded a debit to Prepaid Insurance when the cash was paid for the insurance. To record the expense (which has occurred with the passage of time from November 1 through December 31 ), we'll reduce (credit) the prepaid asset account and will increase (debit) the appropriate expense account. Let's calculate the amount of insurance expense needed for the adjusting entry at year end. Using the amount calculated above, record adjusting entry b. This adjustment will reduce the asset and increase the expense. Joumalize the entry
