hhfma02.qc3.1 shgoodwinmedia.org/media/ssbe/acc/acc101/week3/ch3.pdfhhfma02.qc3.1_sh.tdxex What are the distinctive features of accrual accounting and cash-basis accounting? hhfma02.qc3.2_sh.tdxex

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What are the distinctive features of accrual accounting and cash-basis accounting?


The revenue principle says:


Adjusting the accounts is the process of:


Which types of adjusting entries are natural opposites?

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Assume that weekly payroll of is . December 31, end of the year, falls on Monday, and will pay its employee on Friday for the full week. What adjusting entry will make on

Monday, December 31? (Use five days as a full work week.)


gains a client who prepays for a package of six physical training sessions. collects the in advance and will provide the training later. After two training sessions, what

should report on its income statement?


Assume you prepay Hercules Workout World for a package of six physical training sessions. Which type of accountshould you have in your records?


Unearned revenue is always a (an)


The adjusted trial balance shows


Accounting data flow from the

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Suppose you work summers house-sitting for people while they are away on vacation. Most of your customers pay youimmediately after you finish a job. A few ask you to send them a bill. It is now and you have collected fromcash-paying customers. Your remaining customers owe you .

Requirements1. How much service revenue would you have under the

a. cash basis?b. accrual basis?

2. Which method of accounting provides more information about your house-sitting business?

Requirement 1. How much service revenue would you have under the (a) cash basis, and (b) accrual basis?

Requirement 2. Which method of accounting provides more information about your house-sitting business?

The basis provides more information because it considers all the revenue you earned, including revenue earned on

account. The basis also keeps a record of your receivables from customers. The basis ignores both yourreceivables and the revenue you earned on account.


The Law Firm uses a client database. Suppose paid for a computer.

Requirements1. Describe how the business should account for the expenditure under

a. the cash basis.b. the accrual basis.

2. State why the accrual basis is more realistic for this situation.

Requirement 1. Describe how the business should account for the expenditure under (a) the cash basis and (b) theaccrual basis.

Requirement 2. State why the accrual basis is more realistic for this situation.

The accrual basis is more realistic because .

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Arizona Magazine sells annual subscription for the 12 monthly magazines mailed out each year. The company collects cash inadvance and then mails out the magazines to subscribers each month. Requirement1. Apply the revenue principle to determine

a. when Arizona Magazine should record revenue for this situation. b. the amount of revenue Arizona Magazine should record for the magazines mailed out January through March.

Requirement 1.a. Arizona Magazine should record revenue after , not when

.

b. The amount of revenue equals of the annual subscription.


Suppose on January 1 you prepaid apartment rent of for the full year.

Requirement1. At , what are your two account balances for this situation?

Requirement 1. Identify the two accounts and give their balances at .

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On 1 your company prepaid six months of rent, .

Requirement1. What type of adjusting entry is this?

Requirement 1. This entry is a(an) adjusting entry.


On 1 your company prepaid six months of rent, .

Requirements1. Prepare the journal entry for the payment.2. Prepare the adjustng entry required at 3. Post to the two accounts involved and show their balances at

Requirement 1. Prepare the journal entry for the payment. (Remember, when creating journal entries, record debits first,then credits.)

Requirement 2. Prepare the adjusting entry required at (Remember, when creating journal entries, record debits first,then credits.)

Requirement 3. Post to the two accounts involved and show their balances at

Record the rent payment at the beginning of the month, next the rent expense, and then calculate the account balances in the


T-accounts below.

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On 1 your company paid cash of for computers that are expected to remain useful for years. At the end of years, the value of the computers is expected to be zero, so the depreciation is per year.

Requirements1. Post the purchase of 1 and the depreciation on 31 to T-accounts for the following accounts:

Computer equipment, Accumulated depreciation Computer equipment, and Depreciation expense Computerequipment. Show their balances at 31. (Assume that the journal entries have been completed.)

2. What is the computer equipment's book value at 31?

Requirement 1. Post the purchase of 1 and the depreciation on 31 to T-accounts for the following accounts:Computer equipment, Accumulated depreciation Computer equipment, and Depreciation expense Computer equipment. Showtheir balances at 31. (Assume that the journal entries have been completed.)

(Round your answers to the nearest whole dollar.)

Requirement 2. Calculate the computer equipment's book value at 31.

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Travel borrowed on 1, 2011, by signing a one-year note payable to Bank. interestexpense for the remainder of the fiscal year ( through ) is .

Requirements1. Make the adjusting entry to accrue interest expense at , 2011. Date the entry and include its explanation.2. Post to the T-accounts of the two accounts affected by the adjustment.

Requirement 1. Make the adjusting entry to accrue interest expense at , 2011. Date the entry and include itsexplanation. (Remember, when creating journal entries, record debits first, then credits.)

Requirement 2. Post to the T-accounts of the two accounts affected by the adjustment.


Modern Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements1. Journalize the entry to record the original receipt of cash.2. Journalize the adjusting entry that Modern Magazine makes to record the earning of of subscription revenue that

was collected in advance. Include an explanation for the entry.(Remember, when creating journal entries, record debits first, then credits.)

Requirement 1. Journalize the entry to record the original receipt of cash. On the last line, select the explanation that isappropriate for this journal entry.

Requirement 2. Journalize the adjusting entry that Modern Magazine makes to record the earning of of subscriptionrevenue that was collected in advance. On the last line, select the explanation that is appropriate for this journal entry.

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Hair Stylists has begun the preparation of itsadjusted trial balance as follows:

(Click the icon to view the work sheet.)

Year-end data includes the following: (Click the icon to view the data.)

Requirement1. Complete adjusted trial balance.

Requirement 1. Complete adjusted trial balance. (Leave unused cells blank.)



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a. Supplies on hand, b. Depreciation, c. Accrued interest expense,


Hair Stylists' adjusted trial balance is as follows:

(Click the icon to view the adjusted trial balance.)Requirement1. Compute net income for the year ended December 31, 2010.


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Hair Stylists' adjusted trial balance is as follows:

(Click the icon to view the adjusted trial balance.)

Requirement1. Compute total assets at December 31, 2010.

Requirement 1. Compute total assets at December 31, 2010.

Select the appropriate asset accounts, enter the amounts from the adjusted trial balance and calculate total assets. (Useparentheses or a minus sign for numbers to be subtracted.)


Data Table

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is a photography business that shoots videos at college parties. The freshman class pays in advance onJanuary 3 just to guarantee your services for its party to be held February 2. The sophomore class promises you a minimum of

for filming its formal dance and actually pays cash of on January 28 at the party. Requirements1. Answer the following questions about the correct way to account for revenue under the accrual basis.

a. Considering the paid by the freshman class, on what date was revenue earned? Did the earnings occur on thesame date cash was received?

b. Considering the paid by the sophomore class, on what date was revenue earned? Did the earnings occur on thesame date cash was received?

Requirement 1a. Considering the paid by the freshman class, on what date was revenue earned? Did the earnings occur onthe same date cash was received?

a. Considering the paid by the freshman class, the revenue was earned

Requirement 1b. Considering the paid by the sophomore class, on what date was revenue earned? Did the earnings occuron the same date cash was received?

b. Considering the paid by the sophomore class, the revenue was earned


Catering, Inc., completed the following transactions during , 2012:

(Click the icon to view the transactions.) (Click the icon to view the requirements.)

Requirement 1. Prepare journal entries for each transaction. Use the accrual method of accounting. (When creating journalentries, record debits first, then credits.)

Begin by journalizing the 1 transaction.

Next, journalize the 5 transaction.

Now prepare the journal entry for the 9 transaction.


The 14 transaction can be journalize next.

Journalize the 23 transaction.

Next, make the adjusting entry for rent at .


Finally, accrue salary expense at .

Requirement 2. Using the journal entries you prepared above as a guide, show whether each transaction would be handled as arevenue or an expense, using both the accrual and the cash basis. (Enter "0" for any transactions that do not affect revenues orexpenses. Use parentheses or a minus sign for numbers to be subtracted.)


Requirement 3. Calculate the amount of net income or net loss for Catering under the accrual and cash basis for .(Use parentheses or a minus sign to indicate a loss.)

Requirement 4. Considering your results from requirement 3, which method gives the best picture of the true earnings of Catering? Why?

The gives the best picture of the true earnings of Cuisine because it the revenue principle andthe matching principle.


Data Table

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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 the cash by completing the tableprovided.

3. After completing the table, calculate the amount of net income or net loss for Catering under the accrual and cash basis for .

4. Considering your results from requirement 3, which method gives the best picture of thetrue earnings of Catering? Why?

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Identify the accounting concept or principle (there may be more than one) that gives the most direction on how to account for eachof the following situations:

a. The owner of a business desires monthly financial statements to measure the progress of the entity on an ongoing basis.b. Expenses of the period total $5,500. This amount should be subtracted from revenue to compute the period's net income.c. Expenses of $1,200 must be accrued in order to measure net income properly.d. A customer states her intention to switch health clubs. The health club records no revenue.

For each situation, select the accounting concept(s) or principle(s) that gives the most direction on how to account for thatsituation. We will look at each situation individually. (Leave unused cells blank.)

a. The owner of a business desires monthly financial statements to measure the progress of the entity on an ongoing basis.

b. Expenses of the period total $5,500. This amount should be subtracted from revenue to compute the period's net income.

c. Expenses of $1,200 must be accrued in order to measure net income properly.

d. A customer states her intention to switch health clubs. The health club records no revenue.


Consider the facts presented in the following table for , Inc.:

(Click the icon to view the table.) Requirements1. Complete the table by filling in the missing values.2. Prepare the four journal entries for each situation. Label the journal entries by letter. (Remember, when creating journal

entries, record debits first, then credits. Explanations are not required.)

Requirement 1. Compute the missing amounts.

Requirement 2. Prepare the four journal entries, one for each situation.

Prepare the first journal entry for Situation A to record the rent expense.

Prepare the entry for Situation B for the payment of prepaid rent.


Prepare the rent expense entry for Situation C.

Finally, prepare the entry for the payment of prepaid rent for Situation D.


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Consider the following independent situations at December 31, 2009.

(Click the icon to view the situations.)

Requirements1. For each situation, indicate which category of adjustment is described.2. Journalize the adjusting entry needed at December 31 for each situation. Use the letters to label the journal entries.

Requirement 1. For each situation, indicate which category of adjustment is described.

Requirement 2. Journalize the adjusting entry needed at December 31 for each situation. (Remember to record debits first, thencredits. Explanations are not required.)

a. Journalize the transaction for unearned rent revenue earned.

b. Journalize the employee salaries owed.


c. Journalize the adjustment to the Supplies account.

d. Journalize the depreciation.

e. Journalize the insurance expense.


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a. On 1, a business collected rent in advance, debiting Cash and crediting Unearned rent revenue. The tenant was paying one year'srent in advance. At December 31, business must account for the amount of rent it has earned.

b. Salary expense is per day Monday through Friday and the business pays employees each Friday. This year December 31 falls on a.

c. The unadjusted balance of the Supplies account is . Supplies on hand total .d. Equipment depreciation was .e. On 1, when business prepaid for a two-year insurance policy, business debited Prepaid insurance and credited Cash.

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The accounting records of Architect include thefollowing selected, unadjusted balances at March 31:

Accounts receivable, ; Supplies, $ ; Salary payable,$0; Unearned service revenue, $ ; Service revenue, ;Salary expense, $ ; Supplies expense, $0.

The data developed for the March 31 adjusting entries are(Click the icon to view the data.)

Requirement1. Open a T-account for each account and record the

adjustments directly in the T-accounts, keying eachadjustment by letter. Show each account's adjustedbalance. Journal entries are not required.

Requirement 1. Record the adjustments directly in the T-accounts, keying each adjustment by letter. Show each account'sadjusted balance.


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a. Service revenue accrued, b. Unearned service revenue that has been earned, c. Supplies on hand, d. Salary owed to employee,


Company, the cleaning service, started the preparation of its adjusted trial balance as follows:

(Click the icon to view the trial balance information.)During the months ended , 2010,

(Click the icon to view the transactions.)

Requirement 1. Complete the adjusted trial balance. Key each adjustment by letter.

Requirement 1. Complete the adjusted trial balance. Key each adjustment by letter.

First, post the adjustments in the appropriate column of the trial balance. Then enter the adjusted balances in the last two columns. (Leave unused cells blank. Complete all transactions before checking your answer.)



Data Table

(This information has been incorporated into the work sheets in the exercise. Therefore, the popup can be closed while you are working on the exercise.) More Info


a. Used supplies of b. Used up prepaid insurance of c. Used up of the equipment through depreciationd. Accrued salary expense of that hasn't paid yete. Earned of the unearned service revenue


Refer to the work sheet of Company at , 2010.

(Click the icon to view the completed work sheet.)

Requirement 1. Journalize the five adjustments, all dated , 2010. Explanations are not required.

Requirement 1. Journalize the five adjustments, all dated , 2010. Explanations are not required. (Remember, whencreating journal entries, record debits first, then credits)

Journalize adjustment a.

Journalize adjustment b.

Journalize adjustment c.


Journalize adjustment d.

Journalize adjustment e.


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The adjusted trial balance of follows but is incomplete.

(Click the icon the view the adjusted trial balance information.)

Requirements1. Calculate and enter the adjustment amounts directly in the Adjustments columns. 2. Prepare each adjusting journal entry calculated in requirement 1. Date the entries and include explanations.

Requirement 1. Calculate and enter the adjustment amounts directly in the Adjustments columns.

Key each adjustment in the appropriate column by letter and then total the debit and credit columns.


Requirement 2. Prepare each adjusting journal entry calculated in requirement 1. Date the entries and include explanations.

Journalize adjustment a.


Journalize adjustment b.

Journalize adjustment c.

Journalize adjustment d.



Data Table


The following data at January 31, 2011 is given for .

(Click the icon to view the data.)

Requirements1. Journalize the adjusting entries needed on January 31, 2011. 2. Suppose the adjustments made in requirement 1 were not made. Compute the overall overstatement or understatement of

net income as a result of the omission of these adjustments.

Requirement 1. Journalize the adjusting entries needed on January 31, 2011. (Remember to record debits first, then credits.Explanations are not required.)

a. Journalize the depreciation.

b. Journalize the expired prepaid rent.

c. Journalize the transaction for accrued interest expense.


d. Journalize the employee salaries owed.

e. Journalize the transaction for unearned service revenue earned.

Requirement 2. Suppose the adjustments made in requirement 1 were not made. Compute the overall overstatement orunderstatement of net income as a result of the omission of these adjustments.


Net income would be by $ .

Data Table

a. Depreciation, b. Prepaid rent expired, c. Interest expense accrued, d. Employee salaries owed for Monday through Thursday

of a five-day workweek; weekly payroll, e. Unearned service revenue earned,


The adjusted trial balances of International at 31, 2012, and 31, 2011, include the following amounts:

(Click the icon to view the amounts.)Analysis of the accounts at 31, 2012, reveals the following transactions for the fiscal year ending in 2012:


Requirement1. Compute the amount of Supplies expense, Salary expense, and Service revenue to report on the International income

statement for 2012.

Requirement 1. Compute the amount of Supplies expense, Salary expense, and Service revenue to report on the International income statement for 2012.

Begin by computing the amount of Supplies expense to report on the International income statement for 2012 by completingthe T-account below.

Compute the amount of Salary expense to report on the International income statement for 2012 by completing the T-accountbelow.

Compute the amount of Service revenue to report on the International income statement for 2012 by completing the T-accountbelow.


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The adjusted trial balance of Company, the cleaning service, follows:

(Click the icon to view adjusted trial balance.)

Requirements1. Compute Company's net income for the period ended , 2010.2. Compute Company's total assets at , 2010.

Requirement 1. Compute Company's net income for the period ended , 2010.

The net income of Company for the period ending , 2010 is $ .

Requirement 2. Compute Company's total assets at , 2010.

The total assets of Company at , 2010 is $ .


Data Table


The adjusted trial balance of follows:

(Click the icon to view adjusted trial balance.)Requirements1. Prepare the income statement.2. Prepare the statement of owner's equity. (There were no owner investments for the accounting period.)3. Prepare the balance sheet.

Requirement 1. Prepare the income statement.

Requirement 2. Prepare the statement of owner's equity. (There were no owner investments for the accounting period. Completeall answer boxes.)


Requirement 3. Prepare the balance sheet.

Let's begin with the heading, then complete the asset portion of the balance sheet. In the final step, complete the liabilities andowner's equity portions of the balance sheet.



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The accountant for , CPA has posted adjusting entries (a) through (e) to the accounts at Selectedbalance sheet accounts and all the revenues and expenses of the entity follow in T-account form.

(Click the icon to view the T-accounts.)Requirements1. Prepare the income statement of , CPA, for the year ended 2. Were 2011 operations successful?

Requirement 1. Prepare the income statement of , CPA, for the year ended

Requirement 2. Were 2011 operations successful?

Operations were , as shown by the $ of the business reported for the year.


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Selected balance sheet accounts and all the revenues and expenses of the entity follow in T-account form.


Interiors began the year with capital of . On July 12, received owner investment of cash. The income statement for the year ended December 31, 2011, reported net income of . During this fiscal year,

withdrew each month.

Requirement1. Prepare Interiors' statement of owner's equity for the year ended December 31, 2011.

Requirement 1. Prepare Interiors' statement of owner's equity for the year ended December 31, 2011.

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Golf School completed the following transactions during


Requirement 1. Prepare journal entries for each transaction. Use the accrual method of accounting. (Remember, when creatingjournal entries record debits first, then credits.)

Prepare the journal entries in chronological order. Begin with the first transaction on 1, then follow with the second transactionon 4.

Now record the next two transactions. Record the 5 transaction, then the 8 transaction.


Next, record the following two transactions. Begin with the 11 transaction, and follow with the transaction on 19.

Now record the next three transactions, one at a time, that occur on 24, 26 and 29, respectively.


Finally, record the last two transactions in the order they appear in the data given.

Requirement 2. Using the journal entries as a guide, show whether each transaction would be handled as a revenue or anexpense, using both the accrual and cash basis.

Begin by showing how each transaction would be handled using the accrual basis of accounting. (Enter "0" for any transactionsthat do not affect revenues or expenses. Use parentheses or a minus sign for expenses.)


Now show how each transaction would be handled using the cash basis of accounting. (Enter "0" for any transactions that do notaffect revenues or expenses. Use parentheses or a minus sign for expenses.)


Requirement 3. Using the tables you completed in requirement 2, compute net income for under the accrual basis andcash basis of accounting. (Use parentheses or a minus sign to show a net loss.)

Accrual basis net income (loss) $

Cash basis net income (loss) = $

Requirement 4. Considering your results from requirement 3, which method gives the best picture of the true earnings of Golf School, Inc.? Why?


Data Table

1 Prepaid insurance for through , 4 Performed services (gave golf lessons) on account, 5 Purchased equipment on account, 8 Paid property tax expense,

11 Purchased office equipment for cash, 19 Performed services and received cash, 24 Collected on account26 Paid account payable from 529 Paid salary expense, 31 Recorded adjusting entry for insurance expense (see 1)31 Debited unearned revenue and credited revenue in an adjusting entry,

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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 oran expense, using both the accrual and cash basis.

3. Calculate the amount of net income or net loss for thecompany under the accrual and cash basis for .

4. Considering your results from requirement 3, whichmethod gives the best picture of the true earnings of

Golf School? Why?


Landscaping has the following independent cases at the end of the year on 31, 2011.

(Click the icon to view the independent cases.)Requirement1. Journalize the adjusting entry needed on 31, 2011, for each of the previous items affecting Landscaping.

Requirement 1. Journalize the adjusting entry needed on 31, 2011, for each of the previous items affecting Landscaping. (For adjusting journal entries, remember to record debits first and then credits. Round your answers to the nearestwhole dollar.)

a. pays employees each Friday. The amount of the weekly payroll is for a five-day workweek. fallson a .

Journalize the accrual for salaries at .

b. prepays a full year's insurance each year on January 1 in the amount of .

Journalize the insurance expense for the year ended .


c. The beginning balance of Supplies was . During the year, purchased supplies for , and at the supplies on hand total .

Journalize the supplies expense for the year.

d. designed a landscape plan, and the client paid at the start of the project. recorded thisamount as unearned service revenue. The job will take several months to complete, and estimates that the company hasearned of the total revenue during the current year.

Journalize the service revenue earned at .


e. Depreciation for the current year includes Equipment, ; and Trucks, . Make a compound entry.

Make the compound entry to journalize the depreciation.


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a. Each Friday, pays employees for the current week's work. The amount of theweekly payroll is for a five-day workweek. This year falls on a

. b. Details of Prepaid insurance are shown in the account:

prepays a full year's insurance each year on January 1. Record insuranceexpense for the year ended .

c. The beginning balance of Supplies was . During the year, purchasedsupplies for , and at the supplies on hand total .

d. designed a landscape plan, and the client paid at the start ofthe project. recorded this amount as Unearned service revenue. The job willtake several months to complete, and estimates that the company has earned

% of the total revenue during the current year. e. Depreciation for the current year includes Equipment, ; and Trucks, .

Make a compound entry.(For your convenience, the descriptions of the transactions shown in this pop-up have been fully integrated into the directions for each journal entry, so youmay now close the pop-up while solving this problem.)

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Production Company unadjusted and adjusted trial balances at December 31, 2012, follow.

(Click the icon to view the unadjusted and adjusted trial balances.)

Requirement1. Journalize the adjusting entries that account for the differences between the two trial balances.

Requirement 1. Journalize the adjusting entries that account for the differences between the two trial balances. (Remember, whencreating journal entries, record debits first, then credits.)

The first difference occurs in the Accounts receivable account. Journalize the adjustment to Accounts receivable and the relatedaccount.

The second difference occurs in the Supplies account. Journalize the adjustment to Supplies and the related account.

The third difference occurs in the Prepaid insurance account. Journalize the adjustment to Prepaid insurance and the relatedaccount.


The fourth difference occurs in the Accumulated depreciation account. Journalize the adjustment to Accumulated depreciation andthe related account.

The fifth difference occurs in the Salary payable account. Journalize the adjustment to Salary payable and the related account.


Data Table


The trial balance of at December 31, 2011, and the data needed for the month-end adjustmentsfollow.

(Click the icon to view the trial balance.) (Click the icon to view the adjusting entry information.)

Requirements1. Journalize the adjusting entries.2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries to the ledger

accounts.3. Prepare the adjusted trial balance.4. How will use the adjusted trial balance?

Requirement 1. Journalize the adjusting entries. (Remember, when creating journal entries, record debits first, then credits.)

a. Journalize the transaction for unearned service revenue. Unearned service revenue still unearned, .

b. Journalize the adjustment to prepaid rent. Prepaid rent still in force, .

c. Journalize the adjustment to the supplies account. Supplies used during the month, .


d. Journalize the depreciation for the month, .

e. Journalize accrued advertising expense, . (Credit Accounts payable.)

f. Journalize accrued salary expense, .


Requirement 2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries tothe ledger accounts. Select the appropriate journal entry letter under the heading "Item".

Post journal entry a. to the general ledger accounts.

Post journal entry b. to the general ledger accounts.


Post journal entry c. to the general ledger accounts.


Post journal entry d. to the general ledger accounts.

Post journal entry e. to the general ledger accounts.


Post journal entry f. to the general ledger accounts.


Requirement 3. Prepare the adjusted trial balance.


Requirement 4. How will use the adjusted trial balance?

The company will use the adjusted trial balance to .


Data Table


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Adjustment data at December 31:

a. Unearned service revenue still unearned, b. Prepaid rent still in force, c. Supplies used during the month, d. Depreciation for the month, e. Accrued advertising expense, . (Credit

Accounts payable)f. Accrued salary expense,



(Click the icon to view the trial balance.) (Click the icon to view the data.)Requirements1. Journalize the adjusting entries.2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries to the ledger

accounts.3. Prepare the adjusted trial balance.4. Prepare the income statement, statement of owner's equity and balance sheet for the business for the month ended

December 31, 2010. (There were no owner investments for the accounting period.)


a. Prepaid insurance still in force,

b. Supplies used during the month,


c. Depreciation for the month,

d. Accrued salary expense,

e. Unearned service revenue still unearned,


Requirement 2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries tothe ledger accounts.

Select the appropriate journal entry letter under the heading "Item".











Requirement 4. Prepare the income statement, statement of owner's equity and balance sheet for the business for the monthended December 31, 2010.

Prepare the income statement.


Prepare the statement of owner's equity. (There were no owner investments for the accounting period. Complete all answerboxes.)


Finally, prepare the balance sheet. Begin with the heading, then complete the balance sheet.


Data Table


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Adjustment data at December 31:a. Prepaid insurance still in force, b. Supplies used during the month, c. Depreciation for the month, d. Accrued salary expense, e. Unearned service revenue still unearned,


Consider the unadjusted trial balance of Company at , 2012, and the related month-end adjustmentdata.

(Click the icon to view the month-end adjustment data.) (Click the icon to view the unadjusted trial balance.)

Requirements1. Using the work sheet, prepare the adjusted trial balance of at , 2012. The unadjusted

balances have been entered for you. Key each adjusting entry by letter.2. Prepare the income statement and the statement of owner's equity for the month ended , 2012, and the balance

sheet at that date. (There were no owner's investments for the period.)

Requirement 1. Using the work sheet, prepare the adjusted trial balance of at , 2012. Theunadjusted balances have been entered for you. Key each adjusting entry by letter. Calculate the total debits and credits.


Requirement 2. Prepare the income statement and the statement of owner's equity for the month ended , 2012, and theBalance Sheet at that date.


Begin by preparing the Income Statement for the month ended , 2012.

Prepare the Statement of Owner's Equity for the month ended , 2012. (There were no owner's investments for the period.Complete all input boxes.)


Prepare the balance sheet. Begin with the heading.


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Adjustment data at , 2012:a. Accrued service revenue at , b. One-fifth of the prepaid rent expired during the monthc. Supplies on hand at , d. Depreciation on automobile for the month, e. Accrued salary expense at for one day only. The

five-day weekly payroll is . More Info



The adjusted trial balance of Piano Tuning Service at fiscal year end 31, 2011, follows.

(Click the icon to view adjusted trial balance.) (Click the icon to view the requirements.)

Requirement 1. Prepare 2011 income statement.

Let's start with the preparation of the income statement. Begin with the header. Then complete the income statement by enteringthe accounts, labels, and amounts and calculating net income.

Requirement 2. Prepare the statement of owner's equity for the year. (There were no owner's investments for the year. Completeall answer boxes.)


Requirement 3. Prepare the year-end balance sheet.

Begin with the header. Then list the appropriate accounts and amounts. Label and total each section of the report.


Requirement 4. Which financial statement reports the company's results of operations?

Were the 2011 operations successful?

Requirement 5. Which statement reports the company's financial position?


Data Table


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Requirements1. Prepare 2011 income statement.2. Prepare the statement of owner's equity for the year.3. Prepare the year-end balance sheet.4. Which financial statement reports results of operations?

Were the 2011 operations successful? Cite specifics from thefinancial statements to support your evaluation.

5. Which statement reports the company's financial position?

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Golf School completed the following transactions during


Requirement 1. Prepare journal entries for each transaction. Use the accrual method of accounting. (Remember, when creatingjournal entries record debits first, then credits.)

Prepare the journal entries in chronological order. Begin with the first transaction on 1, then follow with the secondtransaction on 4.

Now record the next two transactions. Record the 5 transaction, then the 8 transaction.


Next, record the following two transactions. Begin with the 11 transaction, and follow with the transaction on 19.

Now record the next three transactions, one at a time, that occur on 24, 26 and 29, respectively.


Finally, record the last two transactions in the order they appear in the data given.

Requirement 2. Using the journal entries as a guide, show whether each transaction would be handled as a revenue or anexpense, using both the accrual and cash basis.

Begin by showing how each transaction would be handled using the accrual basis of accounting. (Enter "0" for any transactionsthat do not affect revenues or expenses. Use parentheses or a minus sign for expenses.)


Now show how each transaction would be handled using the cash basis of accounting. (Enter "0" for any transactions that do notaffect revenues or expenses. Use parentheses or a minus sign for expenses.)


Requirement 3. Using the tables you completed in requirement 2, compute net income for under the accrual basis andcash basis of accounting. (Use parentheses or a minus sign to show a net loss.)

Accrual basis net income (loss) $

Cash basis net income (loss) = $

Requirement 4. Considering your results from requirement 3, which method gives the best picture of the true earnings of Golf School, Inc.? Why?


Data Table

1 Prepaid insurance for through , 4 Performed services (gave golf lessons) on account, 5 Purchased equipment on account, 8 Paid property tax expense,

11 Purchased office equipment for cash, 19 Performed services and received cash, 24 Collected on account26 Paid account payable from 529 Paid salary expense, 31 Recorded adjusting entry for insurance expense (see 1)31 Debited unearned revenue and credited revenue in an adjusting entry,

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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 oran expense, using both the accrual and cash basis.

3. Calculate the amount of net income or net loss for thecompany under the accrual and cash basis for .

4. Considering your results from requirement 3, whichmethod gives the best picture of the true earnings of

Golf School? Why?


Landscaping has the following independent cases at the end of the year on 31, 2011.

(Click the icon to view the independent cases.)Requirement1. Journalize the adjusting entry needed on 31, 2011, for each of the previous items affecting Landscaping.

Requirement 1. Journalize the adjusting entry needed on 31, 2011, for each of the previous items affecting Landscaping. (For adjusting journal entries, remember to record debits first and then credits. Round your answers to the nearestwhole dollar.)

a. pays employees each Friday. The amount of the weekly payroll is for a five-day workweek. falls on a.

Journalize the accrual for salaries at .

b. prepays a full year's insurance each year on January 1 in the amount of .

Journalize the insurance expense for the year ended .


c. The beginning balance of Supplies was . During the year, purchased supplies for , and at thesupplies on hand total .

Journalize the supplies expense for the year.

d. designed a landscape plan, and the client paid at the start of the project. recorded this amount asunearned service revenue. The job will take several months to complete, and estimates that the company has earned ofthe total revenue during the current year.

Journalize the service revenue earned at .


e. Depreciation for the current year includes Equipment, ; and Trucks, . Make a compound entry.

Make the compound entry to journalize the depreciation.


Data Table

a. Each Friday, pays employees for the current week's work. The amount of theweekly payroll is for a five-day workweek. This year falls on a

. b. Details of Prepaid insurance are shown in the account:

prepays a full year's insurance each year on January 1. Record insuranceexpense for the year ended .

c. The beginning balance of Supplies was . During the year, purchasedsupplies for , and at the supplies on hand total .

d. designed a landscape plan, and the client paid at the start of theproject. recorded this amount as Unearned service revenue. The job will takeseveral months to complete, and estimates that the company has earned % ofthe total revenue during the current year.

e. Depreciation for the current year includes Equipment, ; and Trucks, .Make a compound entry.

(For your convenience, the descriptions of the transactions shown in this pop-up have been fully integrated into the directions for each journal entry, so youmay now close the pop-up while solving this problem.)

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Production Company unadjusted and adjusted trial balances at December 31, 2012, follow.

(Click the icon to view the unadjusted and adjusted trial balances.)

Requirement1. Journalize the adjusting entries that account for the differences between the two trial balances.

Requirement 1. Journalize the adjusting entries that account for the differences between the two trial balances. (Remember, whencreating journal entries, record debits first, then credits.)

The first difference occurs in the Accounts receivable account. Journalize the adjustment to Accounts receivable and the relatedaccount.

The second difference occurs in the Supplies account. Journalize the adjustment to Supplies and the related account.

The third difference occurs in the Prepaid insurance account. Journalize the adjustment to Prepaid insurance and the relatedaccount.


The fourth difference occurs in the Accumulated depreciation account. Journalize the adjustment to Accumulated depreciation andthe related account.

The fifth difference occurs in the Salary payable account. Journalize the adjustment to Salary payable and the related account.


Data Table



(Click the icon to view the trial balance.) (Click the icon to view the adjusting entry information.)

Requirements1. Journalize the adjusting entries.2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries to the ledger

accounts.3. Prepare the adjusted trial balance.4. How will use the adjusted trial balance?


a. Journalize the transaction for unearned service revenue. Unearned service revenue still unearned, .

b. Journalize the adjustment to prepaid rent. Prepaid rent still in force, .

c. Journalize the adjustment to the supplies account. Supplies used during the month, .


d. Journalize the depreciation for the month, .

e. Journalize accrued advertising expense, . (Credit Accounts payable.)

f. Journalize accrued salary expense, .


Requirement 2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries tothe ledger accounts. Select the appropriate journal entry letter under the heading "Item".









Post journal entry f. to the general ledger accounts.




Requirement 4. How will use the adjusted trial balance?

The company will use the adjusted trial balance to .


Data Table


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Adjustment data at December 31:

a. Unearned service revenue still unearned, b. Prepaid rent still in force, c. Supplies used during the month, d. Depreciation for the month, e. Accrued advertising expense, . (Credit

Accounts payable)f. Accrued salary expense,


The trial balance of at December 31, 2010, and the data needed for the month-end adjustments follow.

(Click the icon to view the trial balance.) (Click the icon to view the data.)Requirements1. Journalize the adjusting entries.2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries to the ledger

accounts.3. Prepare the adjusted trial balance.4. Prepare the income statement, statement of owner's equity and balance sheet for the business for the month ended

December 31, 2010. (There were no owner investments for the accounting period.)


a. Prepaid insurance still in force,

b. Supplies used during the month,


c. Depreciation for the month,

d. Accrued salary expense,

e. Unearned service revenue still unearned,

Requirement 2. The unadjusted balances have been entered for you in the general ledger accounts. Post the adjusting entries to


the ledger accounts.

Select the appropriate journal entry letter under the heading "Item".











Requirement 4. Prepare the income statement, statement of owner's equity and balance sheet for the business for the monthended December 31, 2010.

Prepare the income statement.


Prepare the statement of owner's equity. (There were no owner investments for the accounting period. Complete all answerboxes.)


Finally, prepare the balance sheet. Begin with the heading, then complete the balance sheet.


Data Table


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Adjustment data at December 31:a. Prepaid insurance still in force, b. Supplies used during the month, c. Depreciation for the month, d. Accrued salary expense, e. Unearned service revenue still unearned,


Consider the unadjusted trial balance of Company at , 2012, and the related month-endadjustment data.

(Click the icon to view the month-end adjustment data.) (Click the icon to view the unadjusted trial balance.)

Requirements1. Using the work sheet, prepare the adjusted trial balance of at , 2012. The unadjusted

balances have been entered for you. Key each adjusting entry by letter.2. Prepare the income statement and the statement of owner's equity for the month ended , 2012, and the Balance

Sheet at that date. (There were no owner's investments for the period.)

Requirement 1. Using the work sheet, prepare the adjusted trial balance of at , 2012. Theunadjusted balances have been entered for you. Key each adjusting entry by letter. Calculate the total debits and credits.


Requirement 2. Prepare the income statement and the statement of owner's equity for the month ended , 2012, andthe Balance Sheet at that date.


Begin by preparing the Income Statement for the month ended , 2012.

Prepare the Statement of Owner's Equity for the month ended , 2012. (There were no owner's investments for theperiod. Complete all input boxes.)


Prepare the balance sheet. Begin with the heading.


Data Table

Adjustment data at , 2012:a. Accrued service revenue at , b. One-fifth of the prepaid rent expired during the monthc. Supplies on hand at , d. Depreciation on automobile for the month, e. Accrued salary expense at for one day only. The

five-day weekly payroll is . More Info



The adjusted trial balance of Piano Tuning Service at fiscal year end 31, 2011, follows.

(Click the icon to view adjusted trial balance.) (Click the icon to view the requirements.)

Requirement 1. Prepare 2011 income statement.

Let's start with the preparation of the income statement. Begin with the header. Then complete the income statement by enteringthe accounts, labels, and amounts and calculating net income.

Requirement 2. Prepare the statement of owner's equity for the year. (There were no owner's investments for the year. Completeall answer boxes.)


Requirement 3. Prepare the year-end balance sheet.

Begin with the header. Then list the appropriate accounts and amounts. Label and total each section of the report.


Requirement 4. Which financial statement reports the company's results of operations?

Were the 2011 operations successful?

Requirement 5. Which statement reports the company's financial position?


Data Table


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Requirements1. Prepare Piano Tuning Service's 2011 income statement.2. Prepare the statement of owner's equity for the year.3. Prepare the year-end balance sheet.4. Which financial statement reports Piano Tuning

Service's results of operations? Were the 2011 operationssuccessful? Cite specifics from the financial statements to supportyour evaluation.

5. Which statement reports the company's financial position?


The trial balance and the posted T-accounts that Lawn Service prepared at 31 is as follows:

(Click the icon to view the trial balance.) (Click the icon to view the posted T-accounts.)Requirements1. determines there are in Lawn Supplies left at 31, 2009. Journalize any required adjusting journal

entries.2. Post to the T-accounts, keying all items by date.3. Prepare the adjusted trial balance.

Requirement 1. determines there are in Lawn Supplies left at 31, 2009. Journalize any required adjustingjournal entries.

Start by journalizing the adjusting entry for the supplies account.

Next, journalize the adjusting entry to record depreciation through 31, 2009. (Round to the nearest dollar)


Requirement 2. Post the adjustments that you journalize in requirement 1 to the T-accounts below, keying each item by date.Compute the ending balance of each account and enter it on the appropriate side of each T-account. (Leave unused cells blank.)



Requirement 3. Prepare the adjusted trial balance by completing the "Preparation of Adjusted Trial Balance" work sheet.

Page 4 of 6


Data Table

* Equipment was purchased on 3 and is expected to remain in service for four years. Data Table

Page 5 of 6


Page 6 of 6

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At the beginning of the year, supplies of were on hand. During the year, Air Conditioning Service paid formore supplies. At the end of the year, has of supplies on hand.

Requirements1. Assume that records supplies by initially debiting an asset account. Therefore, place the beginning balance in the

Supplies T-account, and record the preceding entries directly in the accounts without using a journal.2. Assume that records supplies by initially debiting an expense account. Therefore, place the beginning balance in

the Supplies expense T-account, and record the preceding entries directly in the accounts without using a journal.3. Compare the ending account balances under both approaches. Are they the same?

Requirement 1. Assume that records supplies by initially debiting an asset account. Therefore, place the beginningbalance in the Supplies T-account, and record the preceding entries directly in the accounts without using a journal. (CP = CashPaid in the transaction list. Leave unused cells blank.)

Requirement 2. Assume that records supplies by initially debiting an expense account. Therefore, place the beginningbalance in the Supplies expense T-account, and record the preceding entries directly in the accounts without using a journal. (CP= Cash Paid in the transaction list. Leave unused cells blank.)

Requirement 3. Compare the ending account balances under both approaches. Are they the same?

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At the beginning of the year, Advertising owed customers for unearned service revenue collected in advance. Duringthe year, received advance cash receipts of . At year-end, the liability for unearned revenue is .

(Click the icon to view the requirements.)

Requirement 1. Assume that records unearned revenues by initially crediting a liability account. Enter the beginningbalance in Unearned service revenue T-account. Journalize the cash collection and adjusting entries, and post their dollaramounts in the T-accounts. As references in the T-accounts, denote a cash receipt by CR, and an adjustment by Adj.

Begin by entering the beginning balance in the Unearned service revenue T-account. (Leave unused cells blank.)

Journalize the cash collection.

Journalize the adjusting entry.


Now post the entries to the T-accounts and calculate the ending balance of the Unearned service revenue account. (Leave unusedcells blank.)

Requirement 2. Assume that records unearned revenues by initially crediting a revenue account. Enter the beginningbalance in Service revenue. Journalize the cash collection and adjusting entries, and post their dollar amounts in the T-accounts.As references in the T-accounts, denote a cash receipt by CR, and an adjustment by Adj.

Start by entering the beginning balance in Service revenue T-account. (Leave unused cells blank.)

Journalize the cash collection.


Journalize the adjusting entry.

Now post the entries to the T-accounts and calculate the ending balance of both accounts. (Leave unused cells blank.)

Requirement 3. Compare the ending account balances under both approaches. Are they the same?


More Info

Requirements1. Assume that records unearned revenues by initially crediting a liability account.

Enter the beginning balance in Unearned service revenue T-account. Journalize thecash collection and adjusting entries, and post their dollar amounts in the T-accounts. Asreferences in the T-accounts, denote a cash receipt by CR, and an adjustment by Adj.

2. Assume that records unearned revenues by initially crediting a revenue account.Enter the beginning balance in Service revenue. Journalize the cash collection andadjusting entries, and post their dollar amounts in the T-accounts. As references in theT-accounts, denote a cash receipt by CR, and an adjustment by Adj.

3. Compare the ending balances in the two accounts.

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Pages Pack'n Mail completed the following transactions during 2010:


Requirements1. Journalize these entries by debiting an asset account for Prepaid rent and by crediting a liability account for Unearned

service revenue. Explanations are unnecessary.2. Journalize the related adjustments at December 31, 2010.3. Post the entries to the T-accounts, and show their balances at December 31, 2010. Posting references are unnecessary.4. Repeat requirements 1 - 3. This time, debit Rent expense for the rent payment and credit Service revenue for the collection

of revenue in advance.5. Compare the account balances in requirements 3 and 4. They should be equal.

Requirement 1. Journalize the November transaction by debiting an asset account for Prepaid rent.

Journalize the December transaction by crediting a liability account for Unearned service revenue.


Requirement 2. Journalize the related adjustments at December 31, 2010. Begin by adjusting the Prepaid rent account.

Now adjust the Unearned service revenue account.

Requirement 3. Post the entries to the T-accounts and calculate an ending balance for each account. (Use the first available cellon each debit or credit side.)

Requirement 4. Journalize the November transaction by debiting Rent expense for the rent payment.


Journalize the December transaction by crediting Service revenue for the collection of revenue in advance.

Journalize the related adjustments at December 31, 2010. Begin by adjusting the Prepaid rent account.



Post the entries to the T-accounts and calculate an ending balance for each account. (Use the first available cell on each debit orcredit side.)

Requirement 5. Compare the account balances in requirements 3 and 4.

Data Table

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Pages Pack'n Mail completed the following transactions during 2010:


Requirements1. Journalize these entries by debiting an asset account for Prepaid rent and by crediting a liability account for Unearned

service revenue. Explanations are unnecessary.2. Journalize the related adjustments at December 31, 2010.3. Post the entries to the T-accounts, and show their balances at December 31, 2010. Posting references are unnecessary.4. Repeat requirements 1 - 3. This time, debit Rent expense for the rent payment and credit Service revenue for the collection

of revenue in advance.5. Compare the account balances in requirements 3 and 4. They should be equal.

Requirement 1. Journalize the November transaction by debiting an asset account for Prepaid rent.

Journalize the December transaction by crediting a liability account for Unearned service revenue.


Requirement 2. Journalize the related adjustments at December 31, 2010. Begin by adjusting the Prepaid rent account.


Requirement 3. Post the entries to the T-accounts and calculate an ending balance for each account. (Use the first available cellon each debit or credit side.)

Requirement 4. Journalize the November transaction by debiting Rent expense for the rent payment.


Journalize the December transaction by crediting Service revenue for the collection of revenue in advance.

Journalize the related adjustments at December 31, 2010. Begin by adjusting the Prepaid rent account.



Post the entries to the T-accounts and calculate an ending balance for each account. (Use the first available cell on each debit orcredit side.)

Requirement 5. Compare the account balances in requirements 3 and 4.

Data Table

Documents

hhfma02.qc3.1 shgoodwinmedia.org/media/ssbe/acc/acc101/week3/ch3.pdfhhfma02.qc3.1_sh.tdxex What are the distinctive features of accrual accounting and cash-basis accounting? hhfma02.qc3.2_sh.tdxex