Exam 3: Measuring Business Income: The Adjusting Process

Sam Miyagi began Miyagi Landscaping in 2018. He performed his own bookkeeping using an accounting software package he purchased for that purpose. Sam selected January 31 as his year end to coincide with the slower time of year for the business. In February 2019, Sam provided his accountant, Mary Tang, with the source documents and a backup copy of the software. Mary determined the following: Sam purchased a second-hand truck and trailer on February 28, 2018, in anticipation of starting Miyagi Landscaping. The vehicle stayed in Sam's garage uninsured until April 1, 2018, which was the starting date of his business. Sam paid $12,000 for the truck; he estimates that it will have a useful life in the business of five years at which time he thinks its value will be $0. Sam debited the asset account, Truck, for the cost of the vehicle. On April 1, 2018, a one-year vehicle insurance policy was purchased in the amount of $1,800. The account Prepaid Insurance was debited for the full amount. Gardening supplies were purchased throughout the year. The Gardening Supplies account had a year-end balance of $24,000; a count showed $400 of supplies on hand on January 31, 2019. On January 15, 2019 Sam signed a contract to do monthly lawn maintenance for the municipality starting on May 1. The six-month contract will be paid on a monthly basis in the amount of $1,500 starting May 31. On January 31, Miyagi Landscaping had $2,800 still owing from customers. This amount was unrecorded in the accounting system. Required: Journalize the adjusting entries for the January 31, 2019, year end. Explanations are not required. Date Accounts Debit Credit

When an unearned revenue is initially recorded as a revenue, the adjusting entry:

At the end of the fiscal period, Wilf Carter Services omitted the adjusting entry for accrued salaries. The effect of this error on the financial statements is to:

Unearned revenue shows a beginning balance of $4,700 and an ending balance of $3,400. The adjusting entry shows a credit to service revenue for $10,200. How much cash was received in advance during the year?

Assume the cash was received in the last accounting period. If the adjusting entry to record revenue earned during the current period is not recorded:

On October 1 of the current year, Wood Services received $15,000 for services to be performed evenly over the next 12 months. Wood Services initially recorded the $15,000 as service revenue. The adjusting entry on December 31 of the current year will include a:

Lynnwood Services prepaid six months of insurance in advance on July 1, 2019. Lynnwood Services debited insurance expense for the entire amount of $12,000. The adjusting entry on December 31, 2019, would include:

The concept that requires that accountants record amortization expense on equipment is the:

The use of IFRS for publicly accountable enterprises has the same impact on the adjusting process as the use of ASPE.

Table 3-1 The unadjusted trial balance of Danvon Collection Services at December 31, 2019 follows. Cash \ 4,800 Accounts receivable 10,400 Prepaid insurance 2,000 Prepaid rent 1,000 Office supplies 400 Equipment 16,500 Accumulated amortization \ 2,400 Salaries payable 0 Interest payable 0 Unearned service revenue 600 Note payable 8,000 Ted Danvon, capital 15,200 Ted Danvon, withdrawals 3,000 Service revenue 32,700 Salaries expense 20,500 Amortization expense 0 Rent expense 0 Insurance expense 0 Office supplies expense 0 Interest expense 300 -Refer to Table 3-1. Given the following information, prepare the necessary adjusting entries at year end, December 31, 2019, for Danvon Collection Services. a)A count revealed that $100 of office supplies were still on hand at December 31, 2019. b)The accountant has determined that the prepaid insurance balance at December 31, 2019, should be in the amount of $450. c)The equipment is amortized at the rate of $200 per month. d)The accountant has determined that the unearned service revenue balance at December 31, 2019, should be in the amount of $350. e)Interest of $200 on the note payable has accrued to the end of the year. f)Salaries accrued at December 31, 2019, amounted to $650. g)The accountant has determined that the prepaid rent balance at December 31, 2019, should be in the amount of $100.

Compute the amounts indicated for each of the following independent situations. Situation Beginning supplies balance ? \ 1,550 \ 2,600 \ 2,595 Payments for supplies during the year \ 3,800 ? \ 3,500 \ 1,600 Ending supplies balance \ 2,500 \ 2,370 ? \ 2,600 Supplies expense on the income statement \ 1,400 \ 1,900 \ 3,150 ?

Lawson Delivery initially records all prepaid expenses as expenses and all unearned revenues as revenues. Given the following information, prepare the necessary adjusting entries at year end, December 31, 2019. a)On January 3, 2019, $3,500 of supplies were purchased. A count revealed $700 still on hand at December 31, 2019. b)On January 4, 2019, a $3,150 payment was made to an insurance agency for two and a half years of insurance. c)On June 30, 2019, received nine months' rent in advance from a tenant, $8,100. d)On August 1, 2019, received six months' rent in advance from a tenant, $4,800.

Net income is reported on the income statement at $25,000. Adjusting entries for accrued revenues of $4,000 and unearned revenue earned during the current period of $1,500 were accidentally omitted. The correct net income is:

Prepare adjusting entries for the following items on December 31, the end of the fiscal year for Carson Carpets. The company initially records cash received in advance of performing the service as a liability, and prepaid expenses as current assets. a)Amortization on equipment, $2,500 b)Services performed but unbilled, $3,500 c)Salaries owed to employees at year end, $2,500 d)Unearned service revenue earned, $5,500 e)Supplies used during the year, $3,200 f)Prepaid rent expired during the year, $7,500

A company accepted $6,000 on August 1 for services to be performed evenly over the next 12 months. The adjusting entry on December 31 would include a:

Accrued revenue has:

A liability that arises from an expense that the business has incurred but has not yet paid is called a(n):

Equipment with a cost of $103,000 has a useful life of four years. Using straight-line amortization, what is the book value after three years?

Stanley Fuel Services records $8,000 of service revenue being received in advance and $4,500 of service revenue being accrued. Unearned revenue has a year-end balance of $4,900. The effect of these entries on total service revenue for the year is an increase of:

The income statement should be prepared after the balance sheet is prepared.