Session:4 The Adjustment Process
Problem Set A
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
PA 1.
LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
- earn now, collect now
- earn now, collect later
- earn later, collect now
PA 2.
LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.
- paid balance due for accounts payable $6,900
- charged clients for legal services provided $5,200
- purchased supplies on account $1,750
- collected legal service fees from clients for current month $3,700
- issued stock in exchange for a note payable $10,000
PA 3.
LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, deferred expense, or estimate.
- utilities owed but not paid
- cash received in advance for future services
- supplies inventory purchased
- fees earned but not yet collected
- depreciation expense recorded
- insurance paid for future periods
PA 4.
LO 4.2Identify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
- accounts receivable
- interest payable
- prepaid insurance
- unearned rent
PA 5.
LO 4.2Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).
| Impact 1 | Impact 2 | ||
|---|---|---|---|
| A. | Unearned Fees adjusted from $7,000 to $5,000 | ||
| B. | Recorded depreciation expense of $12,000 | ||
| C. | Prepaid Insurance adjusted from $18,500 to $6,300 | ||
| D. | Supplies account balance $500, actual count $220 |
PA 6.
LO 4.2What two accounts are affected by each of these adjustments?
- billed customers for services provided
- adjusted prepaid insurance to correct
- recorded depreciation expense
- recorded unpaid utility bill
- adjusted supplies inventory to correct
PA 7.
LO 4.3Using the following information:
- make the December 31 adjusting journal entry for depreciation
- determine the net book value (NBV) of the asset on December 31
- Cost of asset, $250,000
- Accumulated depreciation, beginning of year, $80,000
- Current year depreciation, $25,000
PA 8.
LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.
PA 9.
LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.
PA 10.
LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Interest Payable, post any entries that affect the account, and tally the ending balance for the account (assume Interest Payable beginning balance of $2,500).
- March 1, paid interest due on note, $2,500
- December 31, interest accrued on note payable, $4,250
PA 11.
LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Prepaid Insurance, post any entries that affect the account, and tally the ending balance for the account (assume Prepaid Insurance beginning balance of $9,000).
- April 1, paid cash for one-year policy, $18,000
- December 31, unexpired premiums, $4,500
PA 12.
LO 4.3Determine the amount of cash expended for Salaries during the month, based on the entries in the following accounts (assume 0 beginning balances).