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Chapter 3: Q18RQ (page 157)
What are the two rules to remember about adjusting entries?
Accrued revenue refers to the revenue earned but not collected from the customers. An example would be goods sold on account.
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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.)
Question :Austin Acoustics recorded the following transactions during October: a. Received \(2,500 cash from customer for three months of service beginning October 1 and ending December 31. The company recorded a \)2,500 debit to Cash and a \(2,500 credit to Unearned Revenue. b. Employees are paid \)3,000 on Monday following the five-day workweek. October 31 is on Friday. c. The company pays \(440 on October 1 for its six-month auto insurance policy. The company recorded a \)440 debit to Prepaid Insurance and a \(440 credit to Cash. d. The company purchased office furniture for \)8,300 on January 2. The company recorded a \(8,300 debit to Office Furniture and an \)8,300 credit to Accounts Payable. Annual depreciation for the furniture is \(1,000. e. The company began October with \)50 of office supplies on hand. On October 10, the company purchased office supplies on account of \(100. The company recorded a \)100 debit to Office Supplies and a \(100 credit to Accounts Payable. The company used \)120 of office supplies during October. f. The company received its electric bill on October 31 for \(325 but did not pay it until November 10. g. The company paid November’s rent of \)2,500 on October 30. On October 30, the company recorded an \(2,500 debit to Rent Expense and a \)2,500 credit to Cash. Indicate if an adjusting entry is needed for each item on October 31 for the month of October. Assuming the adjusting entry is not made, indicate which specific category or categories of accounts on the financial statements are misstated and if they are overstated or understated. Use the following table as a guide. Item a is completed as an example:used.
Question: Total Pool Services earned \(130,000 of service revenue during 2018. Of the \)130,000 earned, the business received \(105,000 in cash. The remaining amount, \)25,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred \(85,000 of expenses during the year. As of December 31, \)10,000 of the expenses still needed to be paid. In addition, Total Pool Services prepaid $5,000 cash in December 2018 for expenses incurred during the next year. 1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system. 2. Determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.
Question :Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays \(1,000 in advance on March 3 to guarantee services for its party to be held on April 2. The sophomore class promises a minimum of \)2,800 for filming its formal dance and actually pays cash of \(4,100 on February 28 at the dance. Answer the following questions about the correct way to account for revenue under the accrual basis: a. Considering the \)1,000 paid by the freshman class, on what date was revenue recognized? Did the recognition occur on the same date cash was received? b. Considering the $4,100 paid by the sophomore class, on what date was revenue recognized? Did the recognition occur on the same date cash was received?
Question :The following data at July 31, 2018, are given for RCO: a. Depreciation, \(600. b. Prepaid rent expires, \)200. c. Interest expense accrued, \(700. d. Employee salaries owed for Monday through Thursday of a five-day workweek; weekly payroll, \)8,000. Unearned revenue earned, \(1,000. f. Office supplies used, \)150. Requirements 1. Journalize the adjusting entries needed on July 31, 2018. 2. Suppose the adjustments made in Requirement 1 were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments
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