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a.Received $3,600 cash from customer for three months of service beginning October 1, 2012 and ending December 31, 2012. The company recorded a $3,600 debit to Cash and a $3,600 credit to Unearned service revenue.b.Employees are paid $1,500 every Friday for the five-day work week. October 31, 2012 is on Wednesday.c.The company pays $420 on October 1 for their six-month auto insurance policy. The company recorded a $420 debit to Prepaid insurance and a $420 credit to Cash.d.The company purchased office furniture for $6,000 on January 2, 2012. The company recorded a $6,000 debit to Office furniture and a $6,000 credit to Accounts payable. Annual depreciation for the furniture is $1,200.e.The company began October with $55 of supplies on hand. On October 10 the company purchased supplies on account of $115. The company recorded a $115 debit to Supplies and a $115 credit to Accounts payable. The company used $80 of supplies during October.f.The company received their electric bill on October 30 for $205, but did not pay it until November 10. On November 10 they recorded a $205 debit to Utilities expense and a $205 credit to Cash.g.The company paid November's rent on October 30 of $550. On October 30 the company recorded a $550 debit to Rent expense and a $550 credit to Cash.Requirement1.Indicate if an adjusting entry is needed for each item on October 31 and why the entry is needed (i.e., an asset or liability account is over/understated). Indicate which specific account on the balance sheet is misstated. Finally, indicate the correct balance that should appear in the balance sheet account after the adjustment is made. Use the table guide below. Item a is completed as an example:
ItemAdjustment needed?Asset/LiabilityOver-/Understated?Balance sheet accountCorrect balance on October 31a.YesLiabilityOverstatedUnearned service revenue$2,400P3-41BComparing accrual and cash-basis accounting, preparing adjusting entries, and preparing income statements [15–25 min]Carolina's Golf School completed the following transactions during October 2012:Oct1Prepaid insurance for October through December, $900.4Performed services (gave golf lessons) on account, $2,400.5Purchased equipment on account, $1,500.
8Paid property tax expense, $200.11Purchased office equipment for cash, $1,000.19Performed services and received cash, $700.24Collected $500 on account.26Paid account payable from October 5.29Paid salary expense, $1,400.31Recorded adjusting entry for October insurance expense (see October 1).31Debited unearned revenue and credited revenue in an adjusting entry, $1,100.Requirements1.Prepare journal entries for each transaction.
2.Using the journal entries as a guide, show whether each transaction would be handled as a revenue or an expense, using both the accrual and cash basis, by completing the following table:3.After completing the table, calculate the amount of net income or net loss for the company under the accrual and cash basis for October.