Ch04 - Chapter 4 Adjustments, Financial Statements, and the...

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Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings EXERCISES E4–3 Req. 1 (a ) Deferred rent revenue ( - L). ................................ 500 Rent revenue (+R +SE). ...................... 500 To record one month of rent revenue earned ($1,500 ÷ 3 months). (b ) Insurance expense (+E - SE). ........................ 900 Prepaid insurance ( - A). ........................... 900 To record six months of insurance expense ($1,800 x 6/12). (c ) Amortization expense (+E - SE). .................... 1,600 Accumulated amortization (+XA - A). ... 1,600 To record annual amortization expense [($10,000 – $2,000) ÷ 5 years]. Req. 2 Balance Sheet Income Statement Transaction Assets Liabilities Shareholders’ Equity Revenues Expenses Net Income a. NE -500 +500 +500 NE +500 b. –900 NE –900 NE +900 –900 c. –1,600 NE –1,600 NE +1,600 –1,600 E4–4 Req. 1 (a ) Utilities expense (+E - SE). ............................. 220 Accrued utilities payable (+L). .................. 220 To record utilities expense incurred but not yet paid. (b ) Wages expense (+E - SE). ............................. 4,500 Accrued wages payable (+L). .................. 4,500
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To record wages expense incurred but not yet paid, calculated as 10 employees x 3 days x $150 each per day. (c ) Interest receivable (+A). ..................................... 120 Interest revenue (+R +SE). .................... 120 To record interest earned but not yet collected, calculated as $3,000 x 12% x 4/12. Req. 2 Balance Sheet Income Statement Transaction Assets Liabilities Shareholders’ Equity Revenues Expenses Net Income a. NE +220 –220 NE +220 –220 b. NE +4,500 –4,500 NE +4,500 –4,500 c. +120 NE +120 +120 NE +120 E4–7 Req. 1 and 2 a. Deferred expense -- cash paid before expense is incurred. Office supplies expense (+E - SE). ............................ 1,050 Office supplies inventory ( - A). ............................ 1,050 Supplies used in 2008 ($350 + 900 - 200 = $1,050). 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). ......................................... 2,400 Rent revenue (+R +SE). .................................. 2,400 Rent earned in 2008 ($7,200 x 2/6) d. Accrued revenue -- revenue earned before cash is collected. Rent receivable (+A). .................................................... 1,000 Rent revenue (+R +SE). .................................. 1,000 ($500 x 2 months) e. Deferred expense -- cash paid for equipment before being used. Amortization expense (+E
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This note was uploaded on 12/09/2009 for the course ACCO comm 217 taught by Professor Mroz during the Fall '09 term at Concordia Canada.

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Ch04 - Chapter 4 Adjustments, Financial Statements, and the...

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