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Chapter 3: Q12SE (page 160)
Question :At the end of June, Gerber Dental had performed $9,000 of dental services but has not yet billed customers. Record the adjusting entry for accrued revenue.
Answer
Date | Account and Explanation | Debit | Credit |
Accounts Receivable | $9,000 | ||
Service Revenue | $9,000 | ||
To record service revenue earned |
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The net income of Steinbach & Sons, a landscaping company, decreased sharply during 2018. Mort Steinbach, owner and manager of the company, anticipates the need for a bank loan in 2019. Late in 2018, Steinbach instructs the company鈥檚 accountant to record \(2,000 service revenue for landscape services for the Steinbach family, even though the services will not be performed until January 2019. Steinbach also tells the accountant notto make the following December 31, 2018, adjusting entries:
Salaries owed to employees \) 900
Prepaid insurance that has expired 400
Requirements
1. Compute the overall effects of these transactions on the company鈥檚 reported net income for 2018.
2. Why is Steinbach taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by Steinbach鈥檚 action.
3. As a personal friend, what advice would you give the accountant?
Question: Total Pool Services earned \(130,000 of service revenue during 2018. Of the \)130,000 earned, the business received \(105,000 in cash. The remaining amount, \)25,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred \(85,000 of expenses during the year. As of December 31, \)10,000 of the expenses still needed to be paid. In addition, Total Pool Services prepaid $5,000 cash in December 2018 for expenses incurred during the next year. 1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system. 2. Determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.
Question :Consider the following situations for Betterton Welding Services: a. Depreciation for the current year includes equipment, \(2,100. b. Each Monday, Betterton pays employees for the previous week鈥檚 work. The amount of weekly payroll is \)1,400 for a seven-day workweek (Monday to Sunday). This year, December 31 falls on Thursday. Learning Objective 3 Learning Objective 3 Learning Objective 3 Learning Objective 3 Beginning Prepaid Rent Payments for Prepaid Rent during the year Total amount to account for Subtract: Ending Prepaid Rent Rent Expense Situation A B C D \(1,400 700 2,100 800 \) a \(1,000 1,600 700 \)900 b \( 200 1,800 \)1,900 c d \( 700 600 \)1,000 f e CHAPTER 3 164 chapter 3 c. The beginning balance of Office Supplies was \(2,300. During the year, Betterton purchased office supplies for \)3,000, and at December 31 the office supplies on hand totaled \(1,000. d. Betterton prepaid a two full years鈥� insurance on July 1 of the current year, \)6,000. Record insurance expense for the year ended December 31. e. Betterton had earned \(2,800 of unearned revenue. f. Betterton had incurred (but not recorded) \)200 of interest expense on a note payable. The interest will not be paid until February 28. g. Betterton billed customers $3,000 for welding services performed. Journalize the adjusting entry needed on December 31 for each situation. Use the letters to label the journal entries
If an accrued expense is not recorded at the end of the year, what is the impact on the financial statements?
Question :A select list of transactions for Anuradha鈥檚 Goals follows:
April 1 Paid six months of rent, \(4,800.
10 Received \)1,200 from customer for six-month service contract that
began April 1.
15 Purchased a computer for \(1,000.
18 Purchased \)300 of office supplies on account.
30 Work performed but not yet billed to customer, \(500.
30 Employees earned \)600 in salaries that will be paid May 2
For each transaction, identify what type of adjusting entry would be needed. Select from the following four types of adjusting entries: deferred expense, deferred revenue, accrued expense, and accrued revenue.
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