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Chapter 3: Q18RQ (page 157)

What are the two rules to remember about adjusting entries?

Short Answer

Expert verified

Accrued revenue refers to the revenue earned but not collected from the customers. An example would be goods sold on account.

Step by step solution

01

Step-by-Step SolutionStep 1: Explanation of Revenue

Revenue refers to the income received from the customer by providing goods or services to the customers.

02

Treatment of Accrued Revenue

Accrued revenue is reported as revenue in the income statement and also reported as account receivable under the asset section of the balance sheet.

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Most popular questions from this chapter

The Pink Peonies Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,000 for 10 months of advertising. How much advertising expense should Pink Peonies Law Firm record for the two months ending February 28 under the a. cash basis? b. accrual basis?

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Question :Consider the following situations for Betterton Welding Services: a. Depreciation for the current year includes equipment, $2, 100. b . E a c h M o n d a y, B e t t e r t o n p a y s e m p l o y e e s f o r t h e p r e v i o u s w e e k^{'} s w o r k . T h e a m o u n t o f w e e k l y p a y r o l l i s$ 1,400 for a seven-day workweek (Monday to Sunday). This year, December 31 falls on Thursday. Learning Objective 3 Learning Objective 3 Learning Objective 3 Learning Objective 3 Beginning Prepaid Rent Payments for Prepaid Rent during the year Total amount to account for Subtract: Ending Prepaid Rent Rent Expense Situation A B C D $1, 4007002, 100800$ a $1, 0001, 600700$ 900 b $2001, 800$ 1,900 c d $700600$ 1,000 f e CHAPTER 3 164 chapter 3 c. The beginning balance of Office Supplies was $2, 300. D u r i n g t h e y e a r, B e t t e r t o n p u r c h a s e d o f f i c e s u p p l i e s f o r$ 3,000, and at December 31 the office supplies on hand totaled $1, 000. d . B e t t e r t o n p r e p a i d a t w o f u l l y e a r s^{'} i n s u r a n c e o n J u l y 1 o f t h e c u r r e n t y e a r,$ 6,000. Record insurance expense for the year ended December 31. e. Betterton had earned $2, 800 o f u n e a r n e d r e v e n u e . f . B e t t e r t o n h a d i n c u r r e d (b u t n o t r e c o r d e d)$ 200 of interest expense on a note payable. The interest will not be paid until February 28. g. Betterton billed customers $3,000 for welding services performed. Journalize the adjusting entry needed on December 31 for each situation. Use the letters to label the journal entries

On September 1, 2018, Salem Landscaping collected $24,000 in advance from customers for landscaping services. The service revenue will be earned monthly over the 12-month period ending August 31, 2019. Requirements 1. Journalize the entry on September 1 by using the alternative treatment of deferred revenues. 2. Record the December 31, 2018 adjusting entry

What are the two basic categories of adjusting entries? Provide two examples of each.

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