Exam 3: The Adjusting Process

On September 28,2018,Benson Consulting signs a contract with Commercial Cleaning Services.Commercial Cleaning will provide 6 months of office cleaning services for $2,000 per month.Benson Consulting pays $12,000 cash to Commercial Cleaning on September 28,2018.Cleaning services will begin on October 1,2018.Complete the following requirements for Benson Consulting. (1)Prepare the journal entries for September 28,2018 and December 31,2018 (the end of Benson's fiscal year).Make proper journal entries (omit explanations).Deferred expenses are treated initially as assets. (2)If Benson fails to record the December 31,2018 adjusting entry,what is the effect on net income,income statement account(s)and balance sheet account(s)? (3)Why is it important for companies to record adjusting entries?

Adjusting entries record revenues in the period in which cash is received and expenses in the period when cash is paid.

The key differences between the cash basis and accrual basis of accounting can be explained by understanding the rules of debits and credits.

Stallings Company purchased manufacturing equipment for $8,400.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $50 per month.(Assume that the company uses the straight-line method.)

The unadjusted trial balance of James Business Consulting at December 31,2018,and the data for the adjustments follow: James Business Consulting Unadjusted Trial Balance December 31,2018 Balance Balance Cash \ 40,000 Accounts Receivable 12,000 Prepaid Insurance 3,000 Office Supplies 6,000 Accounts Payable \ 5,000 Advertising Payable 0 Tames, Capital 37,000 James, Withdrawals 5,000 Service Revenue 44,000 Advertising Expense 500 Insurance Expense 1,500 Office Supplies Expense 0 Rent Expense 6,000 Salaries Expense 12,000 Total \ 86,000 \ 86,000 Data for adjustments: a.James prepaid 6 months of business insurance on September 30,2018,with coverage beginning on October 1.James treats deferred expenses initially as assets. b.A physical count of office supplies was made on December 31,2018.This count showed a balance of $4,200 office supplies on hand. c.On December 31,2018,James received a bill for the November and December advertising in a local newspaper,$800.This bill will be paid on its due date,which is 1/10/2019. James is preparing financial statements for the quarter ending December 31,2018. Requirements 1.Journalize the adjusting entries on December 31,2018. 2.Prepare the December 31,2018 adjusted trial balance.Use a proper heading.

The accountant of Newton Legal Services failed to make an adjusting entry for supplies that had been used for the year.Assume the supplies were initially recorded as an asset.Which of the following statements is TRUE?

Deferred Revenue is a liability created when a business collects cash from customers in advance of completing a service or delivering a product.

Global Enterprises Company signed a one-year $48,000 note payable at 8% interest on April 1,2018.If Global only adjusts its accounts once a year at year-end,how much interest expense was accrued on December 31,2018? (Round any intermediate calculations to two decimal places,and your final answer to the nearest whole number.)

Accrued revenue is revenue that ________.

The employees of Leichester Services Company worked the last two weeks of December,2016.They received their paychecks on January 2,2017.Which of the following accounts should appear on the income statement for the year ended December 31,2016?

A business purchased equipment for $145,000 on January 1,2019.The equipment will be depreciated over the five years of its estimated useful life using the straight-line depreciation method.The business records depreciation once a year on December 31.Which of the following is the adjusting entry required to record depreciation on the equipment for the year 2019? (Assume the residual value of the acquired equipment to be zero.)

On June 1,Edison Company borrowed $27,000 on a one-year Note Payable with an interest rate of 10% per year.It will repay the principal and interest at the end of the one-year period.The company makes accrual adjustments at the end of each month.The company should record interest expense of $2,700 on June 30.

The goal of matching is to compute an accurate net income or net loss for the time period.

On July 1,Lamba Company paid rent of $15,000 for an equipment storage building from July 1 until December 31.Prepare the adjusting journal entry on July 31.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.

Unearned Revenue is classified as a(n)________ account.

Janno Enterprises prepaid eight months of office rent totaling $9,000 on October 1,2019.The rent period begins on October 1.Assuming Janno records deferred expenses using the alternative treatment,what would be the adjusting entry recorded on December 31,2019?

To fill in the unadjusted trial balance columns in a worksheet,the account balances before adjustments are copied directly from the ________.

Mason Painting Services has a weekly payroll of $27,000.December 31 falls on Wednesday and Mason will pay its employees the following Monday (January 5)for the previous full week.Assume that Mason has a five-day workweek and has an unadjusted balance in Salaries Expense of $810,000 at December 31.What amount should be debited to Salaries Expense on December 31?

Deferred expenses are also called prepaid expenses.

The asset account,Office Supplies had a beginning balance of $5,700.During the accounting period,office supplies were purchased,on account,for $5,100.A physical count,on the last day of the accounting period,shows $2,000 of office supplies on hand.What is the amount of Supplies Expense for the accounting period?