Question

Show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by selecting the amount and indicating whether it is an addition (+) or a subtraction (-). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity. In some case only one column may be affected because all of the specific accounts affected by the transaction are included in that category. Transaction a has been completed as an illustration. a. Provided services to a client on account; revenues totaled $510. b. Paid an insurance premium of $360 for the coming year. An asset, Prepaid Insurance, was debited. c. Recognized insurance expense for one month from the premium transaction in b via a reclassification adjusting entry. d. Paid $825 of wages accrued at the end of the prior month. e. Paid $2,500 of wages for the current month. f. Accrued $675 of wages at the end of the current month. g. Received cash of $1,575 on accounts receivable accrued at the end of the prior month. Required: a. Indicate the financial statement effect. b. Prepare the journal entry for the above transactions. Answer is not complete.

Answer 1

Balance Sheet Income Statement Transaction Adjustment Assets = Liabilities + Stockholders' Equity Net Income Effect + 510 + + -30/ d. 510 .+360 and -360 -30 $ -825 = $ -2,500 = $ .+1575and -1575 -825 + + 675 SASA -2,500 -675 + +

Credit Debit $ 510 $ 510 $ 360 | $ 360 $ 30 360/12 $ 30 No Accounts Title a. Cash Service Revenue Prepaid Insurance Cash Insurance Expenses Prepaid Insurance Wages Payable Cash Wages Expenses Cash Wages Expenses Wages Payable Cash Accounts Receivable $ 825 $ 825 $2,500 $ 2,500 $ -675 $ -675 $1,575 $ 1,575