ACC 205 Week 2

Topics: Generally Accepted Accounting Principles, Accounts receivable, Revenue Pages: 7 (1254 words) Published: April 20, 2014
Week Two Exercise Assignment
Revenue and Expenses

1. Recognition of concepts. Jim Armstrong operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company’s fiscal year ends on June 30. Consider the following items and classify each as either (1) prepaid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.  a. Interest owed on the company's bank loan, to be paid in early July Prepaid expense

b. Professional fees earned but not billed as of June 30
Accrued revenue
c. Office supplies on hand at year-end
Prepaid expense
d. An advance payment from a client for a performance next month at a convention Unearned revenue
e. The payment in part (d) from the client's point of view
Prepaid expense
f. Amounts paid on June 30 for a 1-year insurance policy
Prepaid expense
g. The bank loan payable in part (a)
None of the foregoing
h. Repairs to the firm's copy machine, incurred and paid in June None of the foregoing

2. Understanding the closing process. Examine the following list of accounts:  Note Payable | Accumulated Depreciation: Building |
Alex Kenzy, Drawing | Accounts Payable |
Product Revenue | Cash |
Accounts Receivable | Supplies Expense |
Utility Expense |

Which of the preceding accounts 
a. Appear on a post-closing trial balance? 
Note Payable, Accounts Payable, Cash, Accounts Receivable and Accumulated Depreciation: Building

b. are commonly known as temporary, or nominal, accounts? 

Supplies Expense, UtilityExpense
c. generate a debit to Income Summary in the closing process?  Product Revenue

d. are closed to the capital account in the closing process? Alex Kenzy, Drawing

3. Adjusting entries and financial statements. The following information pertains to Sally Corporation:    * The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned.  a. B

b. Unearned Service Revenue Debit $750, Services Revenue: Credit $750 c. Increase total revenues by $750
  * Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31.  a. D
b. Account receivable Debit $1500, Services Revenues Credit $1500 c. Increase to total revenue by $1500
  * Salaries owed to employees at year-end amounted to $1,000.  a. C
b. Salaries expense Debit $1000, Salaries payable Credit $1000 c. Increase to total expenses by $1000
  * The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.  a. A 

b. Supplies expense Debit $5500, Supplies Credit $5500
c. Increase to total expenses by $5500
  * The company paid $18,000 on October 1 of the current year to Vantage Property Management. The payment was for 6 months’ rent of Sally Corporation’s headquarters, beginning on November 1.  a. A

b. Rent expense Debit $6000, Prepaid Rent Credit $6000
c. Increase to total expenses by $6000
Sally Corporation’s accounting year ends on December 31.  Instructions 
Analyze the five preceding cases individually and determine the following:  a. The type of adjusting entry needed at year-end (Use the following codes: A, adjustment of a prepaid expense; B, adjustment of an unearned revenue; C, adjustment to record an accrued expense; or D, adjustment to record an accrued revenue.)  b. The year-end journal entry to adjust the accounts 

c. The income statement impact of each adjustment (e.g., increases total revenues by $500)

4. Adjusting entries. You have been retained to examine the records of Mary’s Day Care Center as of December 31, 20X3, the close of the current reporting period. In the course of your examination, you discover the following:    * On January 1, 20X3, the Supplies account had a balance of $1,350. During the year, $5,520 worth of supplies was purchased, and a balance of $1,620 remained...
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