Financial Accounting HW

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For the following situations, indicate whether each involves a deferred expense (DE), a deferred
revenue (DR), an accrued liability (AL), or an accrued asset (AA).
Example: DE Office supplies purchased in advance of their use
__________  1. Wages earned by employees but not yet paid
__________  2. Cash collected from subscriptions in advance of publishing a magazine
__________  3. Interest earned on a customer loan for which principal and interest have not yet
been collected
__________  4. One year’s premium on life insurance policy paid in advance
__________  5. Office building purchased for cash
__________  6. Rent collected in advance from a tenant
__________  7. State income taxes owed at the end of the year
__________  8. Rent owed by a tenant but not yet collected

 

Determine whether recording each of the following adjustments will increase (I), decrease (D),
or have no effect (NE) on each of the three elements of the accounting equation.
Assets = Liabilities + Stock. Equity
Example: Wages earned during the period but not yet paid
are accrued.  NE  I  D
1. Prepaid insurance is reduced for the portion of the policy
that has expired during the period.  ________  ________  ________
2. Interest incurred during the period but not yet paid is accrued.  ________  ________  ________
3. Depreciation for the period is recorded.  ________  ________  ________
4. Revenue is recorded for the earned portion of a liability for
amounts collected in advance from customers.  ________  ________  ________
5. Rent revenue is recorded for amounts owed by a tenant
but not yet received.  ________  ________  ________
6. Income taxes owed but not yet paid are accrued.  ________  ________  ________

The steps in the accounting cycle are listed in random order. Fill in the blank next to each step to
indicate its order in the cycle. The first step in the cycle is filled in as an example.
Order  Procedure
________  Prepare a work sheet.
________  Close the accounts.
1  Collect and analyze information from source documents.
________  Prepare financial statements.
________  Post transactions to accounts in the ledger.
________  Record and post adjustments.
________  Journalize daily transactions.

 

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