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Chapter 4

Chapter 4 - CHAPTER 4 CHAPTER 4 EXERCISE 4-2 1 The income...

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CHAPTER 4 CHAPTER 4 EXERCISE 4-2 1. The income statement for Campus Internet Connection would show the following: CAMPUS INTERNET CONNECTION INCOME STATEMENT FOR THE MONTH ENDED JANUARY 31, 2010 Revenues: Membership fees \$10,000* Online usage fees 3,000 Total revenue \$13,000 *500 students signed up × \$20 = \$10,000 2. A partial statement of cash flows for Campus Internet Connection would show the following: Cash received from: Memberships \$4,000 Online usage fees 3,000 3. On Campus’s balance sheet at the end of January, two accounts will appear: Cash \$4,000 (200 memberships paid × \$20) Accounts Receivable 6,000 (300 memberships on account × \$20) EXERCISE 4-5 May 31 Office Supplies Expense 1,630 1

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CHAPTER 4 Office Supplies on Hand 1,630 To record office supplies used: \$1,450 + \$1,100 – \$920. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenues Expenses = Net Income Office Supplies on Hand (1,630) (1,630) Office Supplies Expense 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. EXERCISE 4-5 CONTINUED Supplies May 1 Beg. Bal. 1,450 Purchased in May 1,100 X (amount of supplies used)* May 31 End. Bal. 920 *X = \$1,450 + \$1,100 – \$920 = \$1,630 EXERCISE 4-6 1. \$12,000/6 months = \$2,000 per month 2. Sept. 1 Prepaid Rent 12,000 Cash 12,000 To record prepayment of six months’ rent. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenues Expenses = Net Income 2
CHAPTER 4 Prepaid Rent 12,000 Cash (12,000) 3. Sept. 30 Rent Expense 2,000 Prepaid Rent 2,000 To record one month of rent expense: \$12,000/6. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenues Expenses = Net Income Prepaid Rent (2,000) (2,000) Rent Expense 2,000 (2,000) 4. If the accountant forgot to record an adjusting entry on December 31, net income for the year would be overstated by \$6,000 (\$2,000 per month × 3 months).

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