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Chapter 3: Q.3-1RQ (page 156)
What is the difference between cash basis accounting and accrual basis accounting?
Under the cash basis accounting, revenues and expenses are recording on the basis of cash receipt or payment, whereas under accrual basis of accounting, it is recorded on the basis of earned or incurred.
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Question :Griffin Fishing Charters has collected the following data for the December 31 adjusting entries: a. The company received its electric bill on December 31 for \(375 but will not pay it until January 5. (Use the Utilities Payable account.) b. Griffin purchased a three-month boat insurance policy on November 1 for \)1,200. Griffin recorded a debit to Prepaid Insurance. c. As of December 31, Griffin had earned \(3,000 of charter revenue that has not been recorded or received. d. Griffin鈥檚 fishing boat was purchased on January 1 at a cost of \)33,500. Griffin expects to use the boat for 10 years and that it will have a residual value of \(3,500. Determine annual depreciation assuming the straight-line depreciation method is used. e. On October 1, Griffin received \)9,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Griffin has completed the charter. Requirements 1. Journalize the adjusting entries needed on December 31 for Griffin Fishing Charters. Assume Griffin records adjusting entries only at the end of the year. 2. If Griffin had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide
Question: Match the accounting terminology to the definitions. 3. Time period concept 4. Revenue recognition principle 5. Matching principle a. Requires companies to record revenue when it satisfies each performance obligation. b. Assumes that a business鈥檚 activities can be sliced into small time segments and that financial statements can be prepared for specific periods. c. Guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expenses against the revenues of the period
On October 1, Orlando Gold Exchange paid cash of $57,600 for computers that are expected to remain useful for three years. At the end of three years, the value of the computers is expected to be zero. Requirements 1. Calculate the amount of depreciation for the month of October using the straightline depreciation method. 2. Record the adjusting entry for depreciation on October 31. 3. Post the purchase of October 1 and the depreciation on October 31 to T-accounts for the following accounts: Computer Equipment, Accumulated Depreciation鈥� Computer Equipment, and Depreciation Expense鈥擟omputer Equipment. Show their balances at October 31. 4. What is the computer equipment鈥檚 book value on October 31?
The Pink Peonies Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,000 for 10 months of advertising. How much advertising expense should Pink Peonies Law Firm record for the two months ending February 28 under the a. cash basis? b. accrual basis?
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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