1 Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question. The Johnny Flowers Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,450 for six months of advertising. Johnny Flowers Law Firm recorded $3,450 in the Prepaid Advertising account. If Johnny Flowers Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28? Enter this value as a positive number. Safe Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Safe Home has collected $3,960 from cash-paying customers. Safe Home's remaining customers owe the business $200. Safe Home recorded $3,960 of service revenue for the year. If Safe Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? Splendid Occasions received $2,850 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account. If Splendid Occasions had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? Sweet Catering completed the following selected transactions during May 2016: May 1: Prepaid rent for three months, $1,500 May 5: Received and paid electricity bill, $200 May 9: Received cash for meals served to customers, $290 May 14: Paid cash for kitchen equipment, $3,710 May 23: Served a banquet on account, $2,710 May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $1,650 May 31: Recorded depreciation for May on kitchen equipment, $740 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign. If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign. Identify whether each account would appear on the Balance Sheet or the Income Statement. Accounts Payable Accumulated Depreciation - Truck Interest Payable Rent Payable Accounts Receivable Depreciation Expense 3 Fill in the t-accounts for each situation and label each transaction as Deferrals/Prepaid or Accrual. Calculate the adjusted balance and use a Bal. post reference to show the ending balance of each account. Employees earned $4,300 in salaries that will be paid next month. The Salaries Expense unadjusted balance as of December 31 is $7,800. Adjustment Type: Salaries Expense Salaries Payable A two year insurance policy for $10,560 was purchased on November 1 of the current year. Record the transaction for the year ended December 31. Adjustment Type: Adjustment Type: Salaries Payable Salaries Expense A two year insurance policy for $10,560 was purchased on November 1 of the current year. Record the transaction for the year ended December 31. Adjustment Type: Insurance Expense Prepaid Insurance Used office supplies of $760. The Office Supplies unadjusted balance on December 31 is $10,800. Adjustment Type: Supplies Expense Office Supplies 4 Journalize the adjusting entry needed at December 31 for each situation. Use the Chart of Accounts to review account names! Customers were billed for $4,300 for work completed. Date Accounts and Explanation Debit Credit Incurred interest expense of $2,800 Date Accounts and Explanation Debit Credit The unadjusted balance of Office Supplies at Dec. 31 is $4,500 and at year end the office supplies on hand totaled $1,900. Date Accounts and Explanation Debit Credit