If so what is the adjusting entry state clearly in

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transaction. If so, what is the adjusting entry? State clearly in the adjusting entry whether the account is assets (“A”), liabilities (“L”), stockholder’ s equities (“SE”), revenues (“R”), or expenses (“E”). Use “+” and “ - ” to indicate the “increase” and “decrease” in that account, respectively. A. On July 1, 2009, Timber Lodge paid a two-year insurance premium for a policy on its facilities. This transaction was recorded as follows on July 1, 2009: Dr Prepaid insurance expense (+A) $8,000 Cr Cash (-A) $8,000 Adjusting entry on December 31, 2009: Dr Insurance Expense (+E, -SE) $2,000 Cr Prepaid Insurance Expense (-A) $2,000 B. On October 1, 2009, Timber Lodge collected $24,000 deposit from customers for renting space in the next two years. The $24,000 collection was recorded as follows on October 1, 2009: Dr Cash (+A) $24,000 Cr Unearned rent revenues (+L) $24,000 Adjusting entry on December 31, 2009: Dr Unearned Rent Revenues (-L) $3,000 Cr Rent Revenues (+R; +SE) $3,000 C. On September 1, 2009, Timber Lodge borrowed $60,000 cash and issued a one-year note payable. The note requires 10% interest per year. The total interest of $6,000 is payable on the due date, August 31, 2010. The note was recorded as follows on September 1, 2009: Dr Cash (+A) $60,000 Cr Note payable (+L) $60,000 Adjusting entry on December 31, 2009: Dr Interest Expense (+E; -SE) $2,000 Cr Interest Payable (+L) $2,000 D. On December 31, 2009, a tenant who rented some storage space from Timber Lodge had not paid the rent of $3,000 for December 2009. Adjusting entry on December 31, 2009: Dr Accounts Receivable (+A) $3,000 Cr Rent revenues (+R; +SE) $3,000
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5 | 7 Problem 3: Transaction analyses and general journals (26 marks; 20 minutes) (2 marks each transaction) The Riders Shop Ltd. repairs cars for customers. It has two major sources of revenues, one from the sale of spare parts to customers and the other from providing repair service. The company sells the spare parts at a price twice the acquisition costs. The company began operations on August 1, 2009 with the following chart of accounts: Code Account name Code Account name Code Account name A Cash G Wage payable M Contributed Capital B Accounts Receivable H Accrued expense N Dividends declared C Inventory (“spare parts”) I Dividends payable O Revenues D
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  • Spring '12
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  • Generally Accepted Accounting Principles, Timber Lodge

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