Question

Question 8

1. Table 4-2
   Urban Corporation had the following transactions during April:
   1. The company paid $1,800 for 3 months' rent in advance on April 1.
   2. The company received $800 in advance on April 1 from Wente Company for services to be performed over the next 3 months.
   3. The company borrowed $20,000 from Benson Bank on April 1. The note is for 9 months with all interest due at the end of the note. The bank is charging the company 9% interest.
   4. Okoye Company, a valued customer, placed an order for $1,500 on April 1. Because Okoye is experiencing financial difficulties, it has been allowed to pay with a 3-month note receivable. The interest rate on the note is 8%.
   5. Urban Corporation performed services for a client during April valued at $6,000. The client was billed on May 7.
   
   
   Referring to Table 4-2, part (3), what adjusting entry is necessary for Urban Company on April 30?

   		Interest expense 150 Notes payable 150
   		Interest expense 150 Interest payable 150
   		Interest expense 200 Interest payable 200
   		Interest expense 1,800 Notes payable 1,800
   		Interest expense 200 Notes payable 200

1 points

Question 9

1. Cash flows

   		always precede the adjusting entries.
   		may precede or follow the adjusting entries.
   		always follow the adjusting entries.
   		always precede the closing entries.
   		always follow the unadjusted trial balance.

1 points

Question 10

1. The adjustment for revenue received in advance, which has been earned in the current period, involves a

   		credit to cash.
   		debit to accrued revenue.
   		credit to accrued revenue.
   		debit to unearned revenue.
   		debit to cash.

Answer 1

8)

Interest for the month of April = $20,000 X 9% X 1/12 = $150

Interest is accrued but not paid in the month of April. The adjusting entry would be a debit to Interest expense and credit to interest payable with $150.

2nd option.

9)
Incomes may be received on time or received in advance or may not be received at the end of the year and will be received in the next year. Same applies to expense. Cash may or may not be revenue at the time when adjusting entries are passed. Therefore cash flows may precede or follow adjusting entries.

2nd option.

10)

The journal entry to pass the revenue earned which is received in advance is debit to unearned revenue and credit to revenues.

4th option.