Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 37

Preparing Journal Entries for Deferral and Accrual Adjustments
Service Pro Corp (SPC) determined that its unadjusted net income was $10,000 for the year ended September 30, 2013. For the following transactions and events, show the September 30, 2013, adjusting entries that SPC would make.
a. Prepaid Insurance shows a balance of zero at September 30, but Insurance Expense shows a debit balance of $2,340, representing the cost of a three-year fire insurance policy that was purchased on September 1, 2013.
b. On August 31, 2011, Cash was debited and Scrvice Revenue was credited for $1,500. The $1,500 related to fees for a three-month period beginning September 1, 2013.
c. The company's income tax rate is 20%. An income tax installment of $2,000 was paid for this year on September 1, at which time it was recorded in Prepaid Expenses.