Intro. to Financial Final Review Adjusting Entries Prepayment of Revenue *Customerclient pays before service is performed creating a service liability. *Company performs service requiring an adjustment to the books Springfalls Inc. performs insurance services for their clients. They received $15,000 in Insurance Revenue on 1/1/04. These monies are to go towards the next 3 months. 1/1/04: 2/30/04: Expense Incurred I No Cash Paid *Company has incurred an obligation and does not pay cash thus creating a liability. on 11/1/04, Metro Inc, borrows $200,000 for a one year loan @ 6%. 12/31/04 Revenue Earned | No Cash Paid Company performs a service but does not get paid creating an asset Kringle & Kringle LLP performed legal services for Jollytime Inc., amounting to $150,000. It bills Jollytime on January 25, 2004. 1/25/04: Prepayment of Expense Company pays for something before the company uses it creating an asset. Company uses up the asset with the passage of time. J&F Ltd. purchased office supplies in the amount of $85,000, on 1/1/05. Office supplies as of 2/30/05, had a balance of $80,000. 1/1/05