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Chapter 3: Q.3-3RQ (page 156)
Which accounting concept or principle requires companies to divide their activities into small time segments such as months, quarters, or years?
Time period concept.
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When are adjusting entries completed, and what is their purpose?
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 :The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation鈥擡quipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense鈥擡quipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account鈥檚 adjusted balance.
Question :Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays \(1,000 in advance on March 3 to guarantee services for its party to be held on April 2. The sophomore class promises a minimum of \)2,800 for filming its formal dance and actually pays cash of \(4,100 on February 28 at the dance. Answer the following questions about the correct way to account for revenue under the accrual basis: a. Considering the \)1,000 paid by the freshman class, on what date was revenue recognized? Did the recognition occur on the same date cash was received? b. Considering the $4,100 paid by the sophomore class, on what date was revenue recognized? Did the recognition occur on the same date cash was received?
What is a deferred revenue? Provide an example.
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