Chapter 3: 19DQ (page 139)
Why are the debit and credit entries in the Adjustments columns of the work sheet identified with letters?
Answer:
Letters are used for debit and credit entries to check that entry is complete.
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What are the steps in recording closing entries?
Adjusting entries affect at least one balance sheet account and at least one income statement account.
For the entries below, identify the account to be debited and the account to be credited from the following
accounts: Cash; Accounts Receivable; Prepaid Insurance; Equipment; Accumulated
Depreciation; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Insurance Expense;
Depreciation Expense. Indicate which of the accounts is the income statement account and which is
the balance sheet account.
a. Entry to record revenue earned that was previously received as cash in advance.
b. Entry to record wage expenses incurred but not yet paid (nor recorded).
c. Entry to record revenue earned but not yet billed (nor recorded).
d. Entry to record expiration of prepaid insurance.
e. Entry to record annual depreciation expense.
In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.
A. Current assets
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity
20. Current portion of long-term note payable
In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.
A. Current assets E. Current liabilities
B. Long-term investments F. Long-term liabilities
C. Plant assets G. Equity
D. Intangible assets
11. Rent receivable
Compute Chavez Company’s current ratio using the following information.
Accounts receivable \(18,000 Long-term notes payable \)21,000
Accounts payable 11,000 Office supplies. 2,800
Buildings 45,000 Prepaid insurance 3,560
Cash. 7,000 Unearned services revenue 3,000
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