Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question.

The Blue Nile Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $1,220 for six months of advertising. Blue Nile Law Firm recorded $1,220 in the Prepaid Advertising account.
	If Blue Nile 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 $3,210 from cash-paying customers. Safe Homes remaining customers owe the business $840. Safe Home recorded $3,210 of service revenue for the year.
	Accrual basisCash basis
	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 $1,270 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 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, $1,200 May 5: Received and paid electricity bill, $80 May 9: Received cash for meals served to customers, $3,000 May 14: Paid cash for kitchen equipment, $2,570 May 23: Served a banquet on account, $2,090 May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $550 May 31: Recorded depreciation for May on kitchen equipment, $180
	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.

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.

The unadjusted balance of Office Supplies at Dec. 31 is $10,400 and at year end the office supplies on hand totaled $2,460.

Adjustment Type:

AccrualDeferrals/Prepaids

Supplies Expense
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Office Supplies
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Depreciation for the current year includes Equipment, $2,700. The Accumulated Depreciation - Equipment unadjusted balance as of December 31 is $7,300.

Adjustment Type:

AccrualDeferrals/Prepaids

Depreciation Expense - Equipment
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Accumulated Depreciation - Equipment
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 $4,540. The Prepaid Insurance unadjusted balance as of December 31 is $11,400.

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.

Journalize the adjusting entry needed at December 31 for each situation. Use the Chart of Accounts to review account names!

The unadjusted balance of Office Supplies at Dec. 31 is $5,900 and at year end the office supplies on hand totaled $1,300.
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Used prepaid insurance of $1,300
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Completed services that were paid for six months earlier, $4,900
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Identify whether each account would appear on the Balance Sheet or the Income Statement.

Repairs and Maintenance Expense - Balance Sheet Income Statement

Accumulated Depreciation - Truck - Balance Sheet Income Statement

Truck - Balance Sheet Income Statement

Notes Payable - Balance Sheet Income Statement

Furniture - Balance Sheet Income Statement

Accumulated Depreciation - Furniture - Balance Sheet Income Statement