Chp-04 - Chapter 4 Adjustments Financial Statements and the...

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Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings E4–4. Req. 1 2007 Income statement: Insurance expense ($7,800 x 4/24) = $1,300 used. Shipping supplies expense: ($14,000 + $72,000 - $11,000) = $75,000 used. Req. 2 2007 Balance sheet: Prepaid insurance ($7,800 x 20/24) = $6,500 or $7,800 - $1,300 = $6,500 Shipping supplies (given) = $11,000 Req. 3 Adjusting entry (payment debited to Prepaid Insurance): Prepaid Insurance Insurance Expense 9/1 7,800 AJE 1,300 AJE 1,300 End. 6,500 End. 1,300 Insurance expense (+E, - SE) ...................................... 1,300 Prepaid insurance ( - A) ..................................... 1,300 To record the expiration of insurance for four months ($325 per month). Req. 4 Adjusting entry (payment debited to Shipping Supplies): Shipping Supplies Shipping Supplies Expense Beg. 14,000 Purch. 72,000 AJE 75,000 AJE 75,000 End. 11,000 End. 75,000 Shipping supplies expense (+E, - SE) ......................... 75,000 1
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Shipping supplies ( - A) ...................................... 75,000 To record the use of shipping supplies for the year. 2
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E4–7. Req. 1 and 2 a. Accrued revenue -- revenue earned before cash is collected. Accounts receivable (+A) .............................................. 2,100 Service revenue (+R, +SE) ................................. 2,100 Amount is given. b. Deferred revenue -- cash received before revenue is earned. Unearned storage revenue ( - L) .................................... 400 Storage revenue (+R, +SE) ................................ 400 Storage revenue earned in fiscal year 2006 ($2,400 x 1/6) c. Accrued expense -- expense incurred before cash is paid. Wages expense (+E, - SE) ............................................ 2,900 Wages payable (+L) ............................................ 2,900 Amount is given. d. Deferred expense -- cash paid before expense is incurred. Advertising expense (+E, - SE) ..................................... 450 Prepaid advertising ( - A) ..................................... 450 Advertising used in fiscal year 2006 ($600 x 9/12). e. Deferred expense -- cash paid for equipment before being used. Depreciation expense (+E, - SE) ................................... 23,000 Accumulated depreciation, equipment (+XA, - A) 23,000 Amount is given. f. Deferred expense -- cash paid before expense is incurred. Supplies expense (+E, - SE) ......................................... 50,900 Supplies ( - A) ....................................................... 50,900 Supplies used in 2006 ($15,600 + $47,500 - $12,200) g. Accrued expense -- expense incurred before cash is paid. Interest expense (+E, - SE) .......................................... 2,500 Interest payable (+L) ........................................... 2,500 Interest incurred from October 1 to November 30, 2006 ($150,000 principal x .10 x 2/12) 3
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E4–9. Balance Sheet Income Statement Transaction Assets Liabilities Stockholders’ Equity Revenues Expenses Net Income (a) +2,100 NE +2,100 +2,100 NE +2,100 (b) NE –400 +400 +400 NE +400 (c) NE +2,900 –2,900 NE +2,900 –2,900 (d) –450 NE –450 NE +450 –450 (e) –23,000 NE –23,000 NE +23,000 –23,000 (f) –50,900 NE –50,900 NE +50,900 –50,900 (g) NE +2,500 –2,500 NE +2,500 –2,500 E4–14.
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