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Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answers to the questions.
| The Orange Lily Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $1,640 for six months of advertising. Orange Lily Law Firm recorded $1,640 in the Prepaid Advertising account. | ||
| Accrual basis or Cash basis | ||
| If Orange Lily 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 $2,780 from cash-paying customers. Safe Homes remaining customers owe the business $3,870. Safe Home recorded $2,780 of service revenue for the year. | ||
| Accrual basis or Cash basis | ||
| If Safe Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? | ||
| Marvelous Occasions received $1,510 for services to be performed for the next 10 months on July 31 and recorded this transaction using the Unearned Revenue account. | ||
| Accrual basis or Cash basis | ||
| If Marvelous 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: | ||
| ||
| 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.
Unearned Revenue - Balance Sheet Income Statement
Income Taxes Payable - Balance Sheet Income Statement
Advertising Expense - Balance Sheet Income Statement
Mortgages Payable - Balance Sheet Income Statement
Copyright - Balance Sheet Income Statement
Common Stock - Balance Sheet Income Statement
Fill in the t-accounts for each situation and label each transaction as Deferrals/Prepaid, Accrual, or Depreciation. Use Unadj. Bal. as the label for the opening balance of each account. Calculate the adjusted balance and use a Bal. posting reference to show the ending balance of each account. Enter each transaction on the first available line in the T-Account.
| Completed services that were paid for six months earlier, $2,220. The Service Revenue unadjusted balance as of December 31 is $9,300. The Unearned Revenue balance as of December 31 is $10,100. | |
| Adjustment Type: AccrualDeferrals/PrepaidsDepreciation | |
| Unearned Revenue | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
| Service Revenue | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
| Customers were billed for $3,300 for work completed. The Service Revenue unadjusted balance as of December 31 is $11,800. | |
| Adjustment Type: AccrualDeferrals/PrepaidsDepreciation | |
| Accounts Receivable | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
| Service Revenue | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
| Employees earned $3,790 in salaries that will be paid next month. The Salaries Expense unadjusted balance as of December 31 is $8,300. | |
| Adjustment Type: AccrualDeferrals/PrepaidsDepreciation | |
| Salaries Expense | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
| Salaries Payable | |||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | Nov. 1Nov. 15Dec. 1Dec. 31Unadj. Bal. | ||
| Bal. | Bal. | ||
A T is drawn. The vertical line divides the account into its left and right sides. The left side of the T-account is called the debit side and the right side is called the credit side. The account name is at the top, above the horizontal line.
Journalize the adjusting entry needed at December 31 for each situation. Record debits first, then credits. Check your spelling carefully and do not abbreviate. Use account names exactly as given in the Chart of Accounts.
Customers were billed for $700 for work completed.
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1 | |||
Rent for the year was prepaid on January 1 in the amount of $1,320. Record the transaction for December's rent that has expired.
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1 | |||
Insurance for the next six months was paid on November 1st in the amount of $1,170. Record the journal entry for the two months of insurance expired at year-end.
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1 | |||
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Financial Accounting
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
2nd Edition
9780078110825
