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Chapter 3: Q5SE (page 158)

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.

Short Answer

Expert verified

Answer

Transaction Date

Adjusting Entries Type

April 1

Deferred expense

April 10

Deferred revenue

April 15

Deferred expense

April 18

Deferred expense

April 30

Accrued revenue

April 30

Accrued expense

Step by step solution

01

Explanation of Deferred Expense

Deferred expenses refer to the prepaid expenses, in which payment is made in advance for the expenses of the future. Transaction on April 1 includes payment made for future rent expenses. Transaction on April 15 will include recording of depreciation expense on computer. Transaction on April 18 will include recording of supplies expense

02

Explanation of Deferred Revenue

Deferred revenue refers to the advance amount received by the business for future sale transactions. Transaction on April 10 includes receiving advance for the future service contract.

03

Explanation of Accrued Revenue

Accrued revenue refers to the revenue earned but not collected in cash by the business. Transaction on April 30 includes work performed, but cash has not been received from the customer.

04

Explanation of Accrued Expense

Accrued expenses are the expenses that are incurred by the business but remain unpaid. Transaction on April 30 includes incurred salaries expenses that are unpaid.

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Most popular questions from this chapter

On November 1, Carlisle Equipment had a beginning balance in the Office Supplies account of \(600. During the month, Carlisle purchased \)2,300 of office supplies. At November 30, Carlisle Equipment had $500 of office supplies on hand. Requirements 1. Open the Office Supplies T-account, and enter the beginning balance and purchase of office supplies. 2. Record the adjusting entry required at November 30. 3. Post the adjusting entry to the two accounts involved, and show their balances at November 30.

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On September 1, Big Fan of Toledo prepaid six months of rent, $3,300. Requirements 1. Record the journal entry for the September 1 payment. 2. Record the adjusting entry required at September 30. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances at September 30. (Ignore the Cash account.)

Question :The following data at July 31, 2018, are given for RCO: a. Depreciation, \(600. b. Prepaid rent expires, \)200. c. Interest expense accrued, \(700. d. Employee salaries owed for Monday through Thursday of a five-day workweek; weekly payroll, \)8,000. Unearned revenue earned, \(1,000. f. Office supplies used, \)150. Requirements 1. Journalize the adjusting entries needed on July 31, 2018. 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
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