Question 1

Williams Enterprises prepaid six months of office rent totaling $8,000 on October 1,2017.Assuming Williams records deferred expenses using the alternative treatment,what would be the entry on October 1,2017?

Accepted Answer

Under the alternative treatment for deferred expenses, the expense is recorded immediately. Therefore, Rent Expense is debited and Cash is credited.

Question 2

On September 1,Peterson Maintenance Company contracted to provide monthly maintenance services for the next eight months at a rate of $2,600 per month.The client paid Peterson $20,800 on September 1.Assuming Peterson records deferred revenues using the alternative treatment,what would be the entry on September 1?

Accepted Answer

Under the alternative treatment, revenue is recognized when cash is received, so Peterson would debit Cash and credit Service Revenue for $20,800.

Question 3

Avalon Event Planning Services,Inc.records deferred expenses and deferred revenues using the alternative treatments.It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year.On October 1,it paid $3,600 for insurance for a one-year period.At the end of the year,it will make an adjusting entry that debits Insurance Expense for $1,200.

Accepted Answer

Prepaid Expense = $3,600 × 8/12 = $2,400

Question 4

On March 1,2016,LeBlanc,Inc.paid $60,000 for office rent covering the three-month period ending May 31,2016.Journalize the adjusting entry on March 31 by using the alternative treatment of deferred expenses.

Accepted Answer

The answer of On March 1,2016,LeBlanc,Inc.paid $60,000 for office rent...

Question 5

Wentlent Services,Inc.records deferred expenses as expenses when payment is made in advance and deferred revenues as revenues when the payment is received in advance.At the end of the year,Wentlent Services,Inc.makes the necessary adjustments based on accrual basis accounting.On July 1,it paid rent for an office in the amount of $24,000 for the period July 1 through June 30 of the following year.Provide the year-end adjusting entry for rent prepayment.

Accepted Answer

The answer of Wentlent Services,Inc.records deferred expenses as expenses when...

Question 6

On September 1,Capitol Maintenance Company contracted to provide monthly maintenance services for the next nine months at a rate of $2,400 per month.The client paid Capitol $21,600 on September 1.The maintenance services began on that date.Assuming Capitol records deferred revenues using the alternative treatment,what would be the adjusting entry recorded on December 31?

Accepted Answer

Capitol Maintenance Company is using the alternative treatment for deferred revenue accounting. The company recorded $21,600 as unearned revenue on September 1 when the client paid in advance for the maintenance services for the next nine months. Since three months have already passed by the end of December, Capitol would have earned 3/9 or 1/3 of the $21,600 collected in advance. Therefore, the adjusting entry should be to recognize one-third of the unearned revenue as earned revenue. This means debiting Service Revenue for $8,000 ($2,400 x 3) and crediting Unearned Revenue for $8,000. So, the adjusting entry recorded on December 31 would be: Debit Service Revenue and credit Unearned Revenue for $12,000.

Question 7

The following extract was taken from the worksheet of Kelly Bakers for the year 2016. Kelly takers
Worksheet
December 31, 2016  For the above information,determine the amount of Depreciation Expense for the equipment used in the business.

Accepted Answer

The answer of The following extract was taken from the...

Question 8

Deferred expenses are also called prepaid expenses.

Accepted Answer

Deferred expenses are also known as prepaid expenses because they are expenses that have been paid in advance and are recorded as assets on the balance sheet until they are used or consumed.

Question 9

Stancil Enterprises prepaid four months of office rent totaling $9,000 on October 1,2017.Assuming Stancil records deferred expenses using the alternative treatment,what would be the adjusting entry recorded on December 31,2017?

Accepted Answer

The adjusting entry recorded on December 31, 2017 under the alternative treatment would be to debit Prepaid Rent and credit Rent Expense for $2,250. This is because Stancil prepaid rent for four months, which means that for each month, the expense should only be recognized as it is incurred. As of December 31, 2017, only two months have been incurred, which means that the remaining two months are still prepaid as of that date. Therefore, the prepaid rent account needs to be reduced by $2,250 (i.e., 2/4 x $9,000) and the rent expense needs to be increased by the same amount to reflect the expense incurred during the period.

Question 10

On December 15,Duncan Services,Inc.collected revenue of $3,000 in advance from a new client,and agreed to provide services to the client for the period of December 15 through January 15 of the following year.Assume that the company records deferred revenues using the alternative treatment,and journalize the adjusting entry recorded on December 31.

Accepted Answer

The answer of On December 15,Duncan Services,Inc.collected revenue of $3,000...

Question 11

The accounts that are used in a worksheet are taken from and listed in the same order as the ________.

Accepted Answer

The chart of accounts is a listing of all accounts used by a company and is typically organized in a specific order, which is reflected in the worksheet. The balance sheet and audit report may provide information on the account balances, but they do not dictate the order in which the accounts appear in the worksheet. The journal is a record of individual transactions and is not directly related to the organization of accounts in a worksheet.

Question 12

Sierra Event Planning Services,Inc.records deferred expenses and deferred revenues using alternative treatments.It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year.On December 15,it collected $1,000 from a customer in advance for a series of events that will start late December and end in March.At the end of the year,it had performed approximately 10% of the services for its customer.The adjusting entry on December 31 will include a debit to Service Revenue for $900.

Accepted Answer

Service Revenue = $1,000 × 90% = $900

Question 13

On March 1,2016,Nortons,Inc.paid $60,000 as office rent covering the three-month period ending May 31,2016.Journalize the entry on March 1 by using the alternative treatment of deferred expenses.

Accepted Answer

The answer of On March 1,2016,Nortons,Inc.paid $60,000 as office rent...

Question 14

The worksheet is a useful step in preparing adjusting entries and the unadjusted trial balance.

Accepted Answer

The worksheet is a helpful tool in organizing and summarizing financial information in order to prepare adjusting entries and the unadjusted trial balance.

Question 15

The partial worksheet of Ruth Furniture is as follows:
 Ruth Furniture
Workshegt
December 31, 2016  Accumulated
 $\begin{array}{lll}
\text { Depreciation-Equipment } &&  \$ 8,700&1,200 \
\text { Common Stock } & &15,000 \
\text { Dividends } & 3,000 &\
\text { Service Revenue } & & 10,600 &3,000\
\text { Salaries Expense } & 4,000 & \
\text { Rent Expense } & 2,000 &
\end{array}$ $\begin{array}{lllll}
\text { Depreciation Expense - } & & & 1,200 \
\text { Equipment } & & & \
\text { Supplies Expense } & & & 500& \
\text { Total } & \$ 34,300 & \$ 34,300 & \$ 4,700  & \$ 4,700
\end{array}$ Calculate and enter the amounts for the Adjusted Trial Balance columns.

Accepted Answer

The answer of The partial worksheet of Ruth Furniture is...

Question 16

An internal document that helps summarize data for the preparation of financial statements is called a ________.

Accepted Answer

A worksheet is a helpful tool used within accounting to organize and summarize data before preparing financial statements. It is an internal document that is not part of the formal financial statements but is used to facilitate the process of preparing them. The other options listed (journal, ledger, and chart of accounts) are important components of accounting but are not specifically used to summarize data for the preparation of financial statements.

Question 17

The following extract was taken from the worksheet of Dutch,Inc.for the year 2016.
 Dutch, Inc.
Worksheet
December 31, 2016  From the above information,determine the amount of the Rent Expense adjustment.

Accepted Answer

The answer of The following extract was taken from the...

Question 18

To fill in the unadjusted trial balance columns in a worksheet,the account balances before adjustments are copied directly from the ________.

Accepted Answer

The unadjusted trial balance columns in a worksheet are used to record account balances before any adjustments are made. To fill in these columns, the account balances are copied directly from the general ledger, as this is where all transactions are recorded during the accounting period. The adjusted trial balance and balance sheet of the previous year are not relevant when preparing the unadjusted trial balance. The chart of accounts may be used as a reference, but it is not where the actual account balances are recorded.

Question 19

Deferred revenues are assets because the business has collected the cash before earning the revenue.

Accepted Answer

Deferred revenues, also called unearned revenues, arise when a business collects cash before earning the revenue.

Quiz 3: The Adjusting Process