Exam 4: The Accounting Cycle: Accruals and Deferrals

Adjusting entries Selected ledger accounts used by Cross Country Truck Rentals,Inc.are listed along with identifying numbers.Following this list of account numbers and titles is a series of transactions.For each transaction,you are to indicate the proper accounts to be debited and credited.

Prepaid expenses are assets that should appear on the balance sheet.

Before making month-end adjustments,net income of Cardinal Company was $116,000 for March.Adjusting entries are necessary for the following items: -Depreciation for the month of March: $2,300. -Rental income accrued during March,tenant to pay in April: $800. -Supplies used in March: $100. -Fees earned in March that had been collected in advance: $2,600. After recording these adjustments,net income for March is:

The balance in the Retained Earnings account that appears on the adjusted trial balance is the same as the balance of the Retained Earnings account that is reported on the balance sheet.

Depreciation expense on equipment is considered a cash expense since the company must pay cash for the equipment.

End-of-period adjustments-effect on net income Before making any year-end adjusting entries,the revenues of Hot Jazz Studio exceeded expenses by $127,000.However,the following adjustments are necessary: (a. )Prepaid rent consumed,$1,500. (b. )Services rendered to clients but not yet billed,$20,000. (c. )Interest accrued on notes payable,$1,100. (d. )Depreciation,$4,800. (e. )Accrued wages payable,$3,900. (f. )Fees collected in advance which have now been earned,$7,100. Complete the schedule to determine the net income of Hot Jazz Studio after these adjustments have been recorded.Show the effect of each adjustment in the space provided.Compute net income after adjustments and place answer in space provided.

Adjusting entries-effect on elements of financial statements Galaxy Entertainment prepares monthly financial statements.On July 31,the accountant made adjusting entries to record: (a. )Depreciation for the month of July. (b. )The portion of prepaid rent for outdoor stage and seating which had expired in July. (c. )Earning of ticket revenue for July which had been subscribed in advance.(When patrons purchase the Summer Jazz Series tickets in advance,the accountant credits Unearned Ticket Revenue. ) (d. )Amount owed to Galaxy from the caterer who sold food and beverages during the July performances.The amount due will be paid to the company on August 8. (e. )Amount owed to the musicians which had accrued since the last payday in July. Indicate the effect of each of these adjusting entries on the major elements of the company's financial statements-that is,on revenue,expenses,net income,assets,liabilities,and owners' equity.Organize your answer in tabular form,using the column headings shown below and the symbols + for increase,- for decrease,and NE for no effect.

How much depreciation expense should be recorded for December?

As of January 31,Princess Company owes $500 to Butler Co.for equipment rented during January.If no adjustment is made for this item at January 31,how will Princess's financial statements be affected?

Materiality (A. )Identify several factors considered by an accountant in deciding whether an item is "material." (B. )Does the concept of materiality complicate or simplify the process of making adjusting entries? Give an illustration to support your answer.

Murphy's Auto Co.purchased a large piece of equipment on January 1,2007.The equipment is being depreciated,using the straight-line method,at the rate of $16,000 per year.On January 5,2018,the book value of the machine was $190,000. (a)What was the original cost of the machine? (b)What will the book value be on December 31,2019?

Swordfish Co.earned $75,000 in 2018 and expects to receive 2/3 of the amount in 2019 and the remainder in 2020.How much revenue should Swordfish Co.report in 2018?

Since the Accumulated Depreciation account has a credit balance,it is reported on the liability side of the balance sheet along with other accounts that have a credit balance.

An adjusting entry to convert an asset to expense consists of:

On June 1,Norma Company signed a 12-month lease for warehouse space.The lease requires monthly rent of $550,with 4 months paid in advance.Norma Company records the payment by debiting Prepaid Rent $2,200 and crediting Cash $2,200.At the end of June,what should be the balance of Norma's Prepaid Rent account?

After the appropriate adjusting entry is recorded,the balance in the liability account Unearned Fees will:

Unearned revenue is a liability and should be reported on the income statement.

Adjusting entries are needed:

[The following information applies to the questions displayed below.] Hoffman,Inc.adjusts its books each month but closes its books at the end of the year.The trial balance at March 31 before adjustments is as follows: -According to service contracts,$4,810 of the Unearned Service Revenue has been earned in March.The amount of Service Revenue Earned to be reported in the March income statement is:

Accumulated depreciation is: