Chapter 4 sample test

Chapter 4 sample - Chapter 4 sample test 1 The First Corporations general ledger included the following unadjusted account balances on January 31

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Chapter 4 sample test 1. The First Corporation’s general ledger included the following unadjusted account balances on January 31. Salary expense $1,800 Prepaid insurance $0 Supplies $600 Cash $2,500 Insurance expense $400 Accounts payable $1,200 Dividends $100 Supplies expense $0 The company used up $500 of supplies during January. Prepare the journal entry needed to record the company’s supplies expense for January. The key to this problem is to recognize that supplies expense represents the dollar amount of supplies used up. Since the company used up $500 of supplies in January, January's supplies expense should be $500. The unadjusted trial balance reports supplies expense of $0. So, to record the $500 supplies expense, supplies expense must be increased by $500. Supplies expense is increased from $0 to $500 through a $500 debit. As $500 of supplies are used up, the supplies asset must be decreased by $500. Supplies are decreased by $500 through a $500 credit. Date Description Debits Credits Jan. 31 Supplies Expense 500 Supplies 500 Supplies used in January See text exercise 4.1 and 4.2 for similar material. 2. The Second Corporation’s general ledger included the following unadjusted account balances on February 28. Salary expense $1,800 Prepaid Rent $0 Supplies $600 Cash $2,500 Rent expense $900 Accounts payable $1,200 Dividends $100 Supplies expense $0 During February, the company paid $900 to rent office space for the three-month period February 1 through April 30. Determine the adjusted balance in the company’s prepaid rent account on February 28. The key to this problem is to recognize that prepaid rent is a resource (asset), representing the dollar amount of office space available for the company to use in the future. On February 28, the company still has two month's use of the office space available. February's use of the office space has been used up by the end of February. March and April's use of the office space is still available at the end of February. Since the company paid $900 for three-months' office space, each month's
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space cost $300 ($900 / 3 months = $300 per month). Since two month's use of the office space is still available on February 28, the company should have a prepaid rent asset of $600 ($300 x 2 months = $600) on February 28. See text exercise 4.3 and 4.4 for similar material. 3. The Third Corporation’s general ledger included the following unadjusted account balances on March 31. Salary expense
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This note was uploaded on 10/09/2011 for the course ACCT 60.201 taught by Professor Monty during the Spring '11 term at UMass Lowell.

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Chapter 4 sample - Chapter 4 sample test 1 The First Corporations general ledger included the following unadjusted account balances on January 31

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