Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $1,350 for six months of advertising. Johnny Flowers Law Firm recorded $1,350 in the Prepaid Advertising account.

Accrual basisCash basis

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.

Secure 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, Secure Home has collected $510 from cash-paying customers. Secure Home’s remaining customers owe the business $1,030. Secure Home recorded $510 of service revenue for the year.

Accrual basisCash basis

If Secure Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year?

Marvelous Occasions received $2,600 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account.

Accrual basisCash 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:

  • May 1: Prepaid rent for three months, $2,100
  • May 5: Received and paid electricity bill, $100
  • May 9: Received cash for meals served to customers, $3,530
  • May 14: Paid cash for kitchen equipment, $3,870
  • May 23: Served a banquet on account, $2,330
  • May 31: Made the adjusting entry for rent (from May 1).
  • May 31: Accrued salary expense, $900
  • May 31: Recorded depreciation for May on kitchen equipment, $550

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

Salaries (and Wages) Expense - Balance Sheet Income Statement

Land - Balance Sheet Income Statement

Furniture - Balance Sheet Income Statement

Interest Revenue - Balance Sheet Income Statement

Equipment - Balance Sheet Income Statement

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.

Incurred interest expense of $4,100.

Adjustment Type:

AccrualDeferrals/Prepaids

Interest Expense

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Bal.

Bal.

Interest Payable

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Bal.

Bal.

Used prepaid insurance of $1,960. The Prepaid Insurance unadjusted balance as of December 31 is $11,000.

Adjustment Type:

AccrualDeferrals/Prepaids

Insurance Expense

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Bal.

Bal.

Prepaid Insurance

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Bal.

Bal.

Employees earned $1,800 in salaries that will be paid next month. The Salaries Expense unadjusted balance as of December 31 is $6,600.

Adjustment Type:

AccrualDeferrals/Prepaids

Salaries Expense

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Bal.

Bal.

Salaries Payable

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

Nov. 1Nov. 15Dec. 1Dec. 31

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. Use the Chart of Accounts to review account names!

Used prepaid insurance of $2,800

Date

Accounts and Explanation

Debit

Credit

Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Depreciation for the current year includes Equipment, $1,400.

Date

Accounts and Explanation

Debit

Credit

Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Completed services that were paid for six months earlier, $4,800

Date

Accounts and Explanation

Debit

Credit

Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Step by Step Solution

3.31 Rating (142 Votes )

There are 3 Steps involved in it

Step: 1

Under Accrual basis Accrued Revenue Accrued expense Profit or loss Under Cash basis total cash ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

13th Edition

9780470374948, 470423684, 470374942, 978-0470423684

More Books

Students also viewed these Accounting questions