Financial Act Demonstration Problem #3

40 cr 40 e analysis the admin assistant is paid every

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Unformatted text preview: is: The Admin. Assistant is paid every two weeks, and earns $250 a week. For the last week of February, the admin. Asst. worked but did not get paid (Payday will be March 7). Proper matching of expenses requires that an entry is booked in February for the week that was worked in February. The company has incurred an expense, even though this expense will not be paid until March 7. The company has also incurred a liability, because the wages are owed to the employee. Dr. Cr. Feb 28 Wages Expense 250 Wages Payable 250 F. Analysis: Since the revenue was earned in February, it must be recorded in February, even if Cainas Company has not been paid (Revenue Recognition Principle). Since the amount is owed to the company, revenue is realizable, and there is future economic benefit (Cainas Co. is owed cash). Debit to Accounts Receivable and Credit to Service Revenues. Dr. Feb 28 Accounts receivable 500 Service Revenues G. Cr. 500 Analysis: A bill has been received for electricity that was used in February, but it will not be paid until March. Proper matching of expenses requires an entry to be recorded in February, to accurately reflect the amount owed for electricity expenses incurred in February. The Company 28 Credit to Accounts Payable. Dr. Feb 28 Utilities Expense 225 Utilities Payable Cr. 225 Once these entries have been made, what would the ending balances in the accounts be? Post the amounts to the attached "General Ledger" T accounts and create an adjusted trial balance. 29...
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This note was uploaded on 01/22/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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