Chapter 4- solutions of assigned problems

Chapter 4- solutions of assigned problems - Chapter 4...

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Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings E4–2 (1) A; (2) B; (3) C; (4) D. E4–8 Req. 1 and 2 a. Deferred expense -- cash paid before expense is incurred. Office supplies expense (+E - SE). ............................. 850 Office supplies inventory ( - A). ............................. 850 Supplies used in 2006 ($350 + 800 - 300 = $850). b. Accrued expense -- expense incurred before cash is paid. Wages expense (+E - SE). .......................................... 2,700 Wages payable (+L). ........................................... 2,700 Amount is given. c. Deferred revenue -- cash received before revenue is earned. Unearned rent revenue ( - L). .......................................... 2,600 Rent revenue (+R +SE). .................................. 2,600 Rent earned in 2006 ($7,800 x 2/6) d. Accrued revenue -- revenue earned before cash is collected. Rent receivable (+A). ..................................................... 1,040 Rent revenue (+R +SE). .................................. 1,040 ($520 x 2 months) e. Deferred expense -- cash paid for equipment before being used. Amortization expense (+E - SE). ................................. 6,000 Accumulated amortization, delivery equipment (+XA - A) 6,000 ($30,000 - 6,000) ÷ 4 yrs) f. Deferred expense -- cash paid before expense is incurred. Insurance expense (+E - SE). ..................................... 900 Prepaid insurance ( - A). ....................................... 900 ($1,800 x 6/12 months)
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g. Accrued revenue -- revenue earned before cash is received. Alteration accounts receivable (+A). ............................. 750 Alteration shop revenue (+R +SE). ................. 750 Amount is given. E4–9 Balance Sheet Income Statement Transaction Assets Liabilities Shareholders’ Equity Revenues Expenses Net Income (a) –850 NE –850 NE +850 –850 (b) NE +2,700 –2,700 NE +2,700 –2,700 (c) NE –2,600 +2,600 +2,600 NE +2,600 (d) +1,040 NE +1,040 +1,040 NE +1,040 (e) –6,000 NE –6,000 NE +6,000 –6,000 (f) –750 NE –750 NE +750 –750 (g) +900 NE +900 +900 NE +900 E4–13 Req. 1 Adjusting entries that were or should have been made at December 31: (a) Should have been made. Amortization expense (+E - SE). ............................... 10,000 Accumulated amortization - equipment (+XA - A) 10,000 [($130,000 - 30,000) ÷ 10 years] (b) Should have been made. Unearned fees revenue ( - L). ........................................ 3,000 Fees revenue (+R +SE). ................................ 3,000 Amount is given. (c) Entry already made. Interest expense (+E - SE) . ...................................... 1,500 Interest payable (+L) . ....................................... 1,500 ($15,000 x 10% x 12/12 months) Entry that should have been made. Interest expense (+E
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Chapter 4- solutions of assigned problems - Chapter 4...

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