121_03A - Question 1 Revenue Matching Time-period Which...

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Chapter 3 – Page 1 of 22 Question 1 Revenue Matching Time-period Which principle was being followed? A Revenue Since the sale was completed in March the revenue was recorded in March even though the cash was not collected until June. B Matching The supplies were purchased in January, paid for in February but used in April. Therefore the expense was recorded in April. C Time-period Financial statements are prepared on at regular schedule, at the end of each month, quarter, year. D Revenue An independent assessor valued our inventory at $200,000. Since we sold it for $180,000 we recorded the sale at $180,000. E Matching We did the detective work to identify all costs we incurred this period to generate revenue and recorded the costs on the income statement. F Time-period It is difficult to measure revenues and expenses because some transactions start in one period and end in another. Which principle was being violated? G Matching We purchased a computer in July so we recorded the total cost as equipment expense in July. H Revenue We wait to record the revenue until we collect the cash. I Time-period We only prepare financial statements when someone tells us we need to. Once we went more than two years without preparing a statement. J Revenue We record the sale at the appraiser’s estimate of the item sold. The difference between the estimate and cash collected is booked as a gain or loss. K Matching We record expenses in the period in which they are paid. What did you learn?
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Chapter 3 – Page 2 of 22 Question 2 Accrued expenses occur when the buyer has consumed the goods or services but did not pay for them. The year end is April 30, 2011. Record these accrued expenses as adjusting journal entries. Date Account names Debit Credit A 04/30/11 Salary expense 1,200 Salary payable 1,200 Employees earned salaries in April not yet paid, $1,200 B 04/30/11 Advertising expense 800 Advertising payable 800 Advertising services in April not paid, $800 C 04/30/11 Utilities expense 600 Accounts payable 600 Received utility bill for April but did not pay, $600 D 04/30/11 Interest expense 100 Interest payable 100 Accrued interest expense for April on note payable, $100 The liability account may have an exact name, like “Salary Payable”, or a general name like “Accrued expenses” or “Accrued liabilities”. Later the cash is paid. Record the cash payments. Date Account names Debit Credit E 05/06/11 Salary payable 1,200 Cash 1,200 F 05/08/11 Advertising payable 800 Cash 800 G 05/10/11 Accounts payable 600 Cash 600 H 05/12/11 Interest payable 100 Cash 100 What did you learn?
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Chapter 3 – Page 3 of 22 Question 3 Accrued revenues occur when the seller has earned revenue but did not collect cash. The year end is May 31, 2011. Record these accrued revenues as adjusting journal entries. Date Account names Debit Credit A 05/31/11 Accounts receivable 3,800 Service revenue 3,800 Provided services in May but did not collect cash, $3,800 B 05/31/11 Interest receivable 2,700 Interest revenue 2,700 Earned interest revenue on note receivable, $2,700 C 05/31/11 Royalties receivable 1,800 Royalty revenue 1,800 Earned royalty revenue on patents, $1,800 D 05/31/11
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121_03A - Question 1 Revenue Matching Time-period Which...

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