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Chapter 3: Q 20RQ (page 157)
If an accrued expense is not recorded at the end of the year, what is the impact on the financial statements?
In the income statement, total expenses will be understated and net income will be overstated. In the balance shhet, liabilities will be understated and equity will be overstated.
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Question :The worksheet of Best Jobs Employment Service follows but is incomplete.The following data at April 30, 2018, are given for Best Jobs Employment Service: a. Service revenue accrued, \(700. b. Office supplies used, \)300. c. Depreciation on equipment, \(1,300. d. Salaries owed to employees, \)1,400. Requirements 1. Calculate and enter the adjustment amounts directly in the Adjustments columns. Use letters a through d to label the four adjustments. 2. Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns. 3. Prepare each adjusting journal entry calculated in Requirement 1. Date the entries, and include explanations
Identify the impact on the income statement and balance sheet if adjusting entries for the following situations were not recorded. a. Office Supplies used, \(800. b. Accrued service revenue, \)4,000. c. Depreciation on building, \(3,500. d. Prepaid Insurance expired, \)650. e. Accrued salaries expense, \(2,750. f. Service revenue that was collected in advance has now been earned, \)130
Resort Travel borrowed \(33,000 on September 1, 2018, by signing a one-year note payable to State One Bank. Resort’s interest expense on the note payable for the remainder of the fiscal year (September through November) is \)355. Requirements 1. Record the adjusting entry to accrue interest expense at November 30, 2018. 2. Post the adjusting entry to the T-accounts of the two accounts affected by the adjustment.
Question :At the beginning of the year, office supplies of \(1,200 were on hand. During the year, Tempo Air Conditioning Service paid \)4,000 for more office supplies. At the end of the year, Tempo has $800 of office supplies on hand. Requirements 1. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance and purchase of office supplies in the Office Supplies T-account. 2. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance in the Office Supplies T-account and the purchase of office supplies in the Supplies Expense T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
: Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)
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