CHAPTER 12 Ants Financial Sutements, and the Quality of carings M12-4 LO12-1 Recording Adjusting Entries (Deferred Accounta) In cach of the following transactions (a) through (e) for Romney's Marketing Company, use the three- step process illustrated in the chapter to record the adjusting entry at the end of the current year. The process includes (1) determining if revenue was earned or an expense was incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment a Collected $1,200 rent for the period December 1 of the current year to April 1 of next year, which was credited to Unearned Rent Revenue on December 1. Purchased a machine for $32,000 cash on January 1. The company estimates annual depreciation at $3,200 c. Paid $5,000 for a two-year insurance premium on July 1 of the current year, debited Prepaid Insurance for that amount M12-5 LO12-1 Determining Financial Statement Effects of Adjusting Entries (Deferred Accounts) For each of the transactions in M12-4, indicate the amounts and the direction of effects of the adjusting entry on the clements of the balance sheet and income statement. Using the following format, indicate + for increase, - for decrease, and NE for no effect. BALANCE SHEET Stockholders' Liabilities Equity INCOME STATEMENT Net Ryvenues Expenses Income Transaction Assets M12-6 LO12-1 Recording Adjusting Entries (Accrued Accounts) In each of the following transactions (a) through (c) for Romney's Marketing Company, use the three- step process illustrated in the chapter to record the adjusting entry at the end of the current year. The process includes (1) determining if revenue was earned or an expense was incurred. (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment. a. Estimated electricity usage at $450 for December, to be paid in January of next year. h On September of the current year, loaned $6,000 to an officer who will repay the loan principal and interest in one year at an annual interest rate of 14 percent c. Owed wages to 10 employees who worked four days at $200 cach per day at the end of the current year. The company will pay employees at the end of the first week of next year. M12-7 LO12-1 Determining Financial Statement Effects of Adjusting Entries (Acerved Accounts) For each of the transactions in M12-6, indicate the amounts and the direction of effects of the adjusting entry on the elements of the balance sheet and income statement. Using the following format, indicate + for increase. --for decrease, and NE for no effect. INCOME STATEMENT BALANCE SHEET Stockholders Llabilities Equity Transaction Assets Revenues Expenses Net Income b. G CHAPTER 12 Ants Financial Sutements, and the Quality of carings M12-4 LO12-1 Recording Adjusting Entries (Deferred Accounta) In cach of the following transactions (a) through (e) for Romney's Marketing Company, use the three- step process illustrated in the chapter to record the adjusting entry at the end of the current year. The process includes (1) determining if revenue was earned or an expense was incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment a Collected $1,200 rent for the period December 1 of the current year to April 1 of next year, which was credited to Unearned Rent Revenue on December 1. Purchased a machine for $32,000 cash on January 1. The company estimates annual depreciation at $3,200 c. Paid $5,000 for a two-year insurance premium on July 1 of the current year, debited Prepaid Insurance for that amount M12-5 LO12-1 Determining Financial Statement Effects of Adjusting Entries (Deferred Accounts) For each of the transactions in M12-4, indicate the amounts and the direction of effects of the adjusting entry on the clements of the balance sheet and income statement. Using the following format, indicate + for increase, - for decrease, and NE for no effect. BALANCE SHEET Stockholders' Liabilities Equity INCOME STATEMENT Net Ryvenues Expenses Income Transaction Assets M12-6 LO12-1 Recording Adjusting Entries (Accrued Accounts) In each of the following transactions (a) through (c) for Romney's Marketing Company, use the three- step process illustrated in the chapter to record the adjusting entry at the end of the current year. The process includes (1) determining if revenue was earned or an expense was incurred. (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment. a. Estimated electricity usage at $450 for December, to be paid in January of next year. h On September of the current year, loaned $6,000 to an officer who will repay the loan principal and interest in one year at an annual interest rate of 14 percent c. Owed wages to 10 employees who worked four days at $200 cach per day at the end of the current year. The company will pay employees at the end of the first week of next year. M12-7 LO12-1 Determining Financial Statement Effects of Adjusting Entries (Acerved Accounts) For each of the transactions in M12-6, indicate the amounts and the direction of effects of the adjusting entry on the elements of the balance sheet and income statement. Using the following format, indicate + for increase. --for decrease, and NE for no effect. INCOME STATEMENT BALANCE SHEET Stockholders Llabilities Equity Transaction Assets Revenues Expenses Net Income b. G