E 3-2:
(a) Accrual-basis accounting records the transactions that change a company’s financial statements in the periods in which the events occur rather than in the periods in which the company receives or pays cash. Information presented on an accrual basis is useful because it reveals relationships that are likely to be important in predicting future results. Conversely, under cash-basis accounting, revenue is recorded only when cash is received, and an expense is recognized only when cash is paid. As a result, the cash basis of accounting often leads to misleading financial statements.
(b) Politicians might desire a cash-basis accounting system over an accrual-basis system because if an accrual-accounting system is used, it could mean that billions in government liabilities presently unrecorded would have to be reported in the federal budget immediately. The recognition of these additional liabilities would make the deficit even worse. This is not what politicians would like to see and be held responsible for.
(c) Dear Senator,
It is my understanding, after having taken a beginning course in accounting principles, that the Federal government uses a cash-basis system rather than an accrual-basis accounting system.
I am shocked at such a practice! There must be billions of dollars of liabilities hidden in many contracts that have not been recorded yet for the mere reason that they haven’t been paid yet. I realize that the deficit would dramatically increase if we were to implement an accrual system, but in all fairness, we citizens should be given a more accurate picture of what our government is up to.
Sincerely,
CONCERNED STUDENT
E3-3:
(a) Cash received from revenue.......................................................................... $108,000
Cash paid for expenses.................................................................................. (72,000)
Cash-basis net income........................................................................ $ 36,000
(b) Revenues [($108,000 – $25,000) + $36,000]................................................ $119,000
Expenses [($72,000 – $30,000) + $42,000]................................................... (84,000)
Accrual-basis net income................................................................... $ 35,000
E 3-4:
1. Unearned revenue.
2. Accrued expense.
3. Accrued expense.
4. Accrued revenue.
5. Prepaid expense.
6. Unearned revenue.
7. Accrued revenue.
8. Prepaid expense.
9. Prepaid expense.
10. Prepaid expense.
11. Accrued expense.
E 3-5:
1.
(a) Dec. 31 Interest Expense................................................. 300
Interest Payable
($10,000 × 9% × 4/12)................................. 300
(b) Aug. 31 Interest Expense
($10,000 × 9% × 8/12)....................................... 600
Interest Payable................................................. 300
Notes Payable..................................................... 10,000
Cash.............................................................. 10,900
E 3-6:
Item |
(a) Type of Adjustment |
(b) Accounts before Adjustment |
||
1. |
Accrued Revenues |
Assets Understated Revenues Understated |
||
2. |
Prepaid Expenses |
Assets Overstated Expenses Understated |
||
3. |
Accrued Expenses |
Expenses Understated Liabilities Understated |
||
4. |
Unearned Revenues |
Liabilities Overstated Revenues Understated |
||
5. |
Accrued Expenses |
Expenses Understated Liabilities Understated |
||
6. |
Prepaid Expenses |
Assets Overstated Expenses Understated |
E3-5 Devin Wolf Company has the following balances in selected accounts on December should adopt the...
E3-5 Devin Wolf Company has the following balances in selected accounts on December 31,2017. Accounts Receivable $-0- Accumulated Depreciation-Equipment -0- Equipment 7,000 Interest Payable -0- Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable -0- Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31,2017 1 . Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2017 2. A count of supplies on...
E3-5 Devin Wolf Company has the following balances in selected accounts on December 31, 2017 -0- Accounts Receivable $ -0- Accumulated Depreciation Equipment -- Equipment 7,000 Interest Payable Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable -- Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31, 2017 1. Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2017. 2. A count...
Prepare adjusting entries of the seven items decribed
below
E3-5 Devin Wolf Company has the following balances in selected accounts on December 31,2017. Accounts Receivable $-0- Accumulated Depreciation-Equipment-0- Equipment 7,000 nterest Payable -o- Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable-0- Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31,2017 1, Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2017....
can you answer it with an explanations, please!
E3-4 Yilmaz vilmaz A.Ş. encounters the following situations: Identi moz collects t1,750 from a customer in 2017 for services to be performed in 20 adjus vilmaz incurs utility expense which is not yet paid in cash or recorded. (LO Vilmaz employees worked 3 days in 2017 but will not be paid until 2018. u Yilmaz performs services for a customer but has not yet received cash or recorded the transaction. 5 Yilmaz...
Exercise 3-5 Verne Cova Company has the following balances in selected accounts on December 31, 2019. Accounts Receivable Accumulated Depreciation-Equipment 7,000 Equipment Interest Payable Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31, 2019. Verne Cova Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2019. 1. A count of supplies on December 31, 2019,...
Sunland Company has the following balances in selected accounts on December 31, 2019. 0 8,000 Accounts Receivable Accumulated Depreciation-Equipment Equipment Interest Payable Notes Payable Prepaid Insurance Salaries and Wages Payable Supplies Unearned Service Revenue 9,900 2,820 0 2,100 32,000 All the accounts have normal balances. The information below has been gathered at December 31, 2019. 1. Sunland Company borrowed $9,900 by signing a 12%, one-year note on September 1, 2019. 2. A count of supplies on December 31, 2019, indicates...
Exercise 3-5 Verne Cova Company has the following balances in selected accounts on December 31, 2017 Accounts Receivable Accumulated Depreciation-Equipment Equipment Interest Payable Notes Payable Prepaid Insurance Salaries and Wages Payable Supplies Unearned Service Revenue $ 0 7,000 0 10,100 3,300 2,000 29,600 All the accounts have normal balances. The information below has been gathered at December 31, 2017 1. 2. 3. 4. 5. Verne Cova Company borrowed $10,100 by signing a 1296, one-year note on September 1, 2017. A...
Cullumber Company has the following balances in selected accounts on December 31, 2020. Accounts Receivable $ 0 Accumulated Depreciation—Equipment 0 Equipment 8,000 Interest Payable 0 Notes Payable 10,000 Prepaid Insurance 3,960 Salaries and Wages Payable 0 Supplies 2,200 Unearned Service Revenue 28,000 All the accounts have normal balances. The information below has been gathered at December 31, 2020. 1. Cullumber Company borrowed $11,400 by signing a 9%, one-year note on September 1, 2020. 2. A count of supplies on December...
Problem 3-5A Sunland Company has the following balances in selected accounts on December 31, 2017. Sunland has a calendar year-end. Accounts Receivable $ 0 Accumulated Depreciation—Equipment 0 Equipment 7,200 Interest Payable 0 Notes Payable 9,600 Prepaid Insurance 2,004 Salaries Payable 0 Supplies 2,680 Unearned Revenue 30,200 All the accounts have normal balances. The information below has been gathered on December 31, 2017. 1. Sunland Company borrowed $9,600 by signing a 4%, one-year note on September 1, 2017. 2. A count...
Verne Cova Company has the following balances in selected accounts on December 31, 2020. Accounts Receivable Accumulated Depreciation Equipment Equipment 7,000 Interest Payable Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31, 2020. 1. Verne Cova Company borrowed $10,000 by signing a 12%, one year note on September 1, 2020. 2. A count of supplies on December 31,...