Chapter 3: Q3-4DQ (page 139)
Question: What is a prepaid expense, and where is it reported in the financial statements?
Expenses which are paid in advance are prepaid expense. Prepaid expenses are reported as an asset in the balance sheet.
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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
1. Commissions earned
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
18. Repairs expense
Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each separate situation.
(Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies;
Prepaid Insurance; Equipment; Accumulated Depreciation—Equipment; Wages Payable; Unearned Revenue;
Revenue; Wages Expense; Supplies Expense; Insurance Expense; Depreciation Expense—Equipment.)
a. Depreciation on the company’s equipment for 2017 is computed to be \(18,000.
b. The Prepaid Insurance account had a \)6,000 debit balance at December 31, 2017, before adjusting for
the costs of any expired coverage. An analysis of the company’s insurance policies showed that \(1,100
of unexpired insurance coverage remains.
c. The Office Supplies account had a \)700 debit balance on December 31, 2016; and \(3,480 of office
supplies were purchased during the year. The December 31, 2017, physical count showed \)300 of supplies
available.
d. Two-thirds of the work related to \(15,000 of cash received in advance was performed this period.
e. The Prepaid Insurance account had a \)6,800 debit balance at December 31, 2017, before adjusting for the
costs of any expired coverage. An analysis of insurance policies showed that \(5,800 of coverage had expired.
f. Wage expenses of \)3,200 have been incurred but are not paid as of December 31, 2017.
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
16. Interest 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
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity
8. Accounts payable
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