Question

Use the following to answer questions 9 - 10 On November 1", the company received a $21,000 payment from a customer for services to be rendered evenly over the next three months. Deferred Revenue was credited on November 1 and no other entries regarding this transaction were made until December 31st. 9. $_ After the adjusting entry has been recorded on December 31", determine the ending balance in the deferred revenue account that should be recorded on the December 31" Balance Sheet. 10. $ After the adjusting entry has been recorded on December 31", determine the amount of service revenue that should be recognized for this customer on the annual income statement on December 31st. Use the following to answer questions 11 - 12 On September 1" the company borrows $100,000 from a local bank for nine months. A note is signed with principal and 4.596 interest to be paid when the note matures next year. A note payable was recognized on September 19 and no other entries regarding this transaction were made until December 31st. 11. $_ In the adjusting entry recorded on December 31 determine the amount of interest expense that should be reported. 12. What effect would failure to record the adjusting entry for this note payable have on the financial statement items? A. would cause it to be overstated B. would cause it to be understated C. would have no effect Assets Liabilities Stockholders' Equity Revenue Expenses Net income Use the following to answer questions 13-14 The company incurs employee salaries of $27,000 for the last week of December which will be paid on January 5th. 13. Record the adjusting entry on December 31 related to the employee salaries Account Debit Credit 14. __ Indicate by how much net income in the income statement is higher or lower if the adjustment in #13 is not recorded (if lower put" in front of your answer).

Answer 1

Adjusting entries are the entries made for adjusting the revenue and expenses for the period in which they are incurred. It is done at the end of the accounting period after preparing the unadjusted trail balance.

Ans 9 Ans 10 Deferred Revenue as on 31st Dec Revenue recognised in income statement $7,000 $14,000 Credit Working Journal Entry Date Account Title Nov 1 Cash Deferred Revenue Dec 31 Deferred Revenue ($21000/3x2] Service Revenue Debit $21,000 $21,000 $14,000 $14,000 $14,000 Income Statement Service Revenue Balance Sheet Deferred Revenue ($21000-$14000] $7,000 Ans 11 Interest Expense reported $1,500 Ans 12 в Assets Liabilities Stockholders' Equity Revenue Expense Net Income would have no effect would cause it to be understated would cause it to be overstated would have no effect would cause it to be understated would cause it to be overstated B A Credit Working Journal Entry Date Account Title Debit Sep 1 Cash $1,00,000 Notes Payable Dec 31 Interest Expense [($100000 x 4.5%)/12 x 4] $1,500 Interest Payable $1,00,000 $1,500

Ans 13 Journal Entry Date Account Title Dec 31 Salaries and Wages Expense Salaries and Wages Payable Credit Debit $27,000 $27,000 Ans 14 Net income will be $27000 higher if the adjusting entry is not passed