Lecture_Notes_-_Assign_3

Solution the 6 months was november 2005 to april 2006

Info icon This preview shows pages 3–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Solution: The 6 months was November 2005 to April 2006. Two months in 2005 and 4 months in 2006. The financial statements should show two months expense – for the months expired in 2005- and 4 months prepaid for the months not yet expired in 2006. 2,400/6 months = $400 per month $400*2months = 800 expense $400*4 months = 1,600 prepaid Take two months out of the prepaid and put it into the expense account. Dec 31 st Dr Insurance Expense 800 Cr Prepaid Insurance 800 (To properly record insurance) Prepaid Insurance _ Insurance Expense Begin balance 2,400 │ Adjustment 800 │800 Adjustment Ending balance 1,600│ 2. Deferred Revenue a. Landlord receives January rent on December 29 th , $1,000. Solution: This is January rent, so it is revenue in January. Dec 29 th Dr Cash 1,000 Cr Unearned Rent 1,000 (To record receipt of January rent) b. Unearned rent has a balance of $24,000 representing a whole year’s rent. The lease began October 1 st . Solution: Rent earned for 3 months Oct – Dec. Unearned rent for 9 months Jan – Sept. 24,000/12 months = 2,000 per month 2,000*3 months = 6,000 earned 2,000*9 months = 18,000 unearned Dec 31 st Dr Unearned rent 6,000 Cr Rent revenue 6,000 (To properly state the unearned rent account.) Unearned Rent ______ Rent Revenue__ │24,000 beg balance │6,000 Adjustment Adjustment 6,000 18,000 ending balance
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
c. Unearned fees has a balance of $25,000. Of these fees, $11,000 are earned. Solution: Dec 31 st Dr Unearned fees 11,000 Cr Fees Earned 11,000 Unearned Fees ______ Fees Earned__ │25,000 beg balance │11,000 Adjustment Adjustment 11,000 14,000 ending balance 3. Accrued Expenses a. January 3 rd received a bill for repairs completed Dec 27 th , $183. Paid the bill on Jan 15 th . Solution: Dec 31 st Dr Repairs expense 183 Cr Accounts payable 183 (To record the expense in the year it was used.) b. Wages of $5,000 paid weekly based on a five day week – Monday to Friday. December 31 st is a Wednesday. Solution: Wages are an expense. Monday, Tuesday and Wednesday wages are an expense in 2005. 5,000/5 days = 1,000 per day 1,000*3 days = 3,000 expense Dec 31 st Dr Wages expense 3,000 Cr Wages payable 3,000 4. Accrued Revenue a. In December, talked to customer, in January performed the service, in February received the cash. What month is the revenue recorded (earned)? Solution: January – that is when the service was done. b. Fees earned December 29 th . Invoices mailed January 2 nd , cash received February 6 th , $3,625. How does this get recorded? Solution: Revenues are normally recorded the date the invoices are mailed. As the revenue was earned in December, it needs to be included in December’s accounts. On January 2 nd , when the invoices are being prepared, the accountant will date the invoice December 29 th , the date of the service. Dec 29 th Dr Accounts Receivable 3,625 Cr Fees Earned 3,625 (To record revenues earned in the correct year.)
Image of page 4
c. Interest earned on certificate of deposit in 2005, $172. Cash will be received in 2006. Solution: Because the revenue was earned in 2005, it must be recorded in 2005.
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern