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Quick Check and Quiz Answers -- Chapter Three

Quick Check and Quiz Answers -- Chapter Three - Quick...

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Quick Check (page 164-166) Solutions: 1. (a) On November 1 st when the $4,800 was received the entry was: Cash 4800 Unearned Rent Revenue 4800 The payment was for three months rent so each month rent revenue would be $1600 (4800/3). At December 31 st one month should remain in unearned and 2 months should be recorded as revenue. The adjusting entry would be as follows: Unearned rent revenue 3200 Unearned rent revenue 3200 Unearned Rent Revenue | 4800 entry of November 1 st Adjusting entry 3200 | Ending Balance | 1600 2. (c) Book value is the carrying value of the equipment. Book value is defined as Cost minus Accumulated Depreciation. Equipment 90000 Less: accumulated depreciation (15000) Book value 75000 3. (b) At the end of the period the amount in the supplies account (an asset) should agree to the actual amount of supplies on hand. If the supplies account has a $900 dollar balance and it should show $600 per the count of supplies at year-end the supplies account will have to be reduced (credited) by $300. The Supply account decreased because $300 of supplies were used and this should be recorded as an expense. The adjusting entry at year-end will look like this: Supply expense 300 Supplies 300 4. (d) I think it is handy to analyze transactions by using the equations for the balance sheet, income statement, and statement of retained earnings (if needed). Assets = Liabilities + Owners’ Equity Revenue – Expenses = Net Income High = High Low=High If depreciation is not recorded the following entry would not be made : Depreciation expense xxx Accumulated Depreciation xxx 5. (c) To accrue interest revenue we must credit a revenue account. Also, adjusting entries do not involve cash.
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