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Chatper 4 Homework Solutions

# Chatper 4 Homework Solutions - Chatper 4 Homework Solutions...

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Chatper 4 Homework Solutions LO 5 EXERCISE 4-3 ACCRUALS AND DEFERRALS 1. AL 5. DE 2. DR 6. DR 3. AA 7. AL 4. DE 8. AA LO 5 EXERCISE 4-4 OFFICE SUPPLIES May 31 Office Supplies Expense 1,630 Office Supplies on Hand 1,630 To record office supplies used: \$1,450 + \$1,100 – \$920. Assets = Liabilities + Owners’ Equity –1,630 –1,630 Net income for the month of May would be overstated by \$1,630 if this adjusting entry were not recognized, because expenses would be understated. LO 5 EXERCISE 4-6 DEPRECIATION 1. July 1 Equipment 100,000 Cash 100,000 To record purchase of combine. Assets = Liabilities + Owners’ Equity +100,000 –100,000 2. Purchase price \$ 100,000 Less estimated salvage value (16,000 ) Depreciable cost \$ 84,000 3. Monthly depreciation = depreciable cost/estimated life = \$84,000/84 months = \$1,000/month.

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4. July 31 Depreciation Expense 1,000 Accumulated Depreciation 1,000 To record one month’s depreciation expense. Assets = Liabilities + Owners’ Equity –1,000 –1,000 5. Equipment \$100,000 Less: Accumulated depreciation (6 months × \$1,000/month) (6,000 ) Carrying value \$ 94,000 LO 5 EXERCISE 4-7 PREPAID INSURANCE—ANNUAL ADJUSTMENTS 1. Monthly cost: \$72,000/24 months = \$3,000 . 2. April 1 Prepaid Insurance 72,000 Cash 72,000 To record purchase of 24-month policy. Assets = Liabilities + Owners’ Equity +72,000 –72,000 3. Dec. 31 Insurance Expense 27,000 Prepaid Insurance 27,000 To record expiration of nine months of insurance. Assets = Liabilities + Owners’ Equity –27,000 –27,000 4. Net income will be overstated by \$27,000 if the accountant forgets to record an entry to recognize an expense.
LO 5 EXERCISE 4-8 SUBSCRIPTIONS 1. August Cash 27,000 Subscriptions Received in Advance 27,000 To record collection of 900 subscriptions of \$30 each. Assets = Liabilities + Owners’ Equity +27,000 +27,000 2. Aug. 31 Subscriptions Received in Advance 7,500 Subscription Revenue 7,500 To record subscriptions earned during August: \$40,500 + \$27,000 – \$60,000. Assets = Liabilities + Owners’ Equity –7,500 +7,500 3. Net income for the month would be understated by \$7,500 if the accountant forgot to make the entry to recognize revenue earned. LO 5 EXERCISE 4-10 WAGES PAYABLE [GRADED] 1. Weekly payroll: \$10 per hour × 7 hours per day × 5 days × 50 employees = \$17,500 2. Oct. 27 Wages Expense 17,500 Cash 17,500 To record payment of weekly payroll. Assets = Liabilities + Owners’ Equity –17,500 –17,500 3. Oct. 31 Wages Expense 7,000 Wages Payable 7,000 To record accrual for two days’ wages: \$17,500/5 days × 2 days. Assets = Liabilities + Owners’ Equity +7,000 –7,000

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4. Nov. 3 Wages Expense 10,500 Wages Payable 7,000 Cash 17,500 To record payment of weekly payroll.
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Chatper 4 Homework Solutions - Chatper 4 Homework Solutions...

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