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Chapter 3: Q 27QS_c (page 145)

On December 31, 2016, Yates Co. prepared an adjusting entry for \(12,000 of earned but unrecorded consulting
fees. On January 16, 2017, Yates received \)26,700 cash in consulting fees, which included the
accrued fees earned in 2016. (Assume the company uses reversing entries.)
a. Prepare the December 31, 2016, adjusting entry.
b. Prepare the January 1, 2017, reversing entry.
c. Prepare the January 16, 2017, cash receipt entry.

Short Answer

Expert verified

Answer:

The cash account is debited and consulting fess credited with $26,700.

Step by step solution

01

Step-by-Step Solution

Step 1: Definition of accrued revenue

When work is done but payment is not received, this amount is known as accrued revenue

02

Reversal Entry

	Journal entry
Date	Particular	Debit	Credit
January 16, 2017	Cash	$26,700
	Consulting Fees		$26,700
	(Entry for the receipt of accrued revenue)

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Most popular questions from this chapter

Question: Choose from the following list of terms/phrases to best complete the statements below.

a. Fiscal year d. Accounting period g. Natural business year

b. Timeliness e. Annual financial statements h. Time period assumption

c. Calendar year f. Interim financial statements i. Quarterly statements

1. presumes that an organization’s activities can be divided into specific time periods.

2. Financial reports covering a one-year period are known as .

3. A(n)consists of any 12 consecutive months.

4. A(n)consists of 12 consecutive months ending on December 31.

5. The value of information is often linked to its .

Question: What is a prepaid expense, and where is it reported in the financial statements?

Question: Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR),

accrued

expenses (AE), or accrued revenues (AR).

a. To record revenue earned that was previously received as cash in advance.

b. To record wages expense incurred but not yet paid (nor recorded).

c. To record revenue earned but not yet billed (nor recorded).

d. To record expiration of prepaid insurance.

e. To record annual depreciation expense.

Review Apple’s balance sheet in Appendix A. Identify one asset account that requires adjustment before annual financial statements can be prepared. What would affect the income statement if this asset account were not adjusted? (Number not required, but comment on over-or understating of net income.)

Question: Following are two income statements for Alexis Co. for the year ended December 31. The left number

column is prepared before any adjusting entries are recorded, and the right column includes the effects of

adjusting entries. The middle column shows a blank space for each income statement effect of the eight

adjusting entriesathrough g(the balance sheet part of the entries is not shown here). Analyze the statements

and prepare the eight adjusting entries athrough gthat likely were recorded. Note:Answer for ahas

two entries (i) of the \(7,000 adjustment for Fees Earned, 30% (or \)2,100) has been earned but not billed,

and (ii) the other 70% (or \(4,900) has been earned by performing services that were paid for in advance.

ALEXISUnadjusted Adjustments Adjusted

Revenues

Fees earned . \)18,000 a. \(25,000

Commissions earned . 36,500 36,500

Total revenues 54,500 61,500

Expenses

Depreciation expense—Computers 0 b. 1,600

Depreciation expense—Office furniture . 0 c.1,850

Salaries expense 13,500 d. 15,750

Insurance expense . 0 e.1,400

Rent expense 3,800 3,800

Office supplies expense 0 f. 580

Advertising expense 2,500 2,500

Utilities expense . 1,245 g. 1,335

Total expenses . 21,045 28,815

Net income \)33,455 $32,685

See all solutions

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