Chapter+4-1

Chapter+4-1 - M44(a 1 Rent revenue is now earned 2 Cash was...

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M4–4. (a) 1. Rent revenue is now earned. 2. Cash was received in the past – a deferred revenue was recorded. 3. Amount: $1,000 ÷ 4 months = $250 earned Adjusting entry – Unearned rent revenue ( - L) .................................................. 250 Rent revenue (+R, +SE) .............................................................. 250 (b) 1. Depreciation Expense on the equipment is now incurred. 2. Cash was paid in the past when the equipment was purchased -- a deferred expense was recorded. The net book value of the equipment is overstated. Accumulated Depreciation (the contra-account) needs to be increased for the amount used during the period. 3. Amount: $3,000 given Adjusting entry – Depreciation expense (+E, - SE) ............................................................... 3,000 Accumulat ed depreciation (+XA, - A) ....................................................... 3,000 (c) 1. Insurance expense was incurred in the period. 2. Cash was paid for the insurance in the past – a deferred expense was recorded. 3. Amount: $4,200 x 6/24 = $1,050 Adjusting entry – Insurance expense (+E, - SE) ............................................................... 1,050 Prepaid insurance ( - A) ............................................... 1,050
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M4–6. (a) 1. Utilities Expense is incurred. 2. Cash will be paid in the future for utilities used in the current period – an accrued expense needs to be recorded.
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