Book 2 - Chapter 8

Multiple Choice
1.	c Choice “a” is a deferral—cash has been paid before the expense. There is no expense with “b”—an asset is purchased.
2.	d 3. a 4. c
5.	b Accounts receivable are understated. Revenue is also understated, which understates net income.
6.	a Accounts payable (or similar payables) are understated. Expense is also understated, which overstates net income.
7.	c 8. a 9. d ($3,300)

Reinforcement Problems

8-1.

Item	Accrued . . .		Not an accrual
	Revenue	Expense
	Revenue	Expense
a. Dutchess Company owes employee wages in the amount of $15,000 that are not recorded.
b. Finger Lakes Tourist Company has fees earned but unbilled of $7,500.
c. Niagra Company received the December telephone bill in early January.
d. On June 30, fiscal year end for Corning, Inc. $10,000 of wages expense accrued since the last payday.
e. Briarcliffe Company collected $4,500 from accounts receivable.	There is no revenue here—just collecting cash owed by customers.
f. Services provided but unbilled are $9,800.
g. Utica Partnership has $3,000 of rent still due from tenants at year end.
h. Westchester Company earned $2,500 of a customer advance that had been credited to unearned revenue.	This revenue has already been prepaid by the customer—a deferral.
i. On December 31, year end, Jefferson Company records show $1,500 of interest on money borrowed unpaid and not due until January 15.
j. On March 3, Rockaway Operations Co. signed a contract to provide $12,000 of consulting services.	Signing a contract does not immediately affect the accounting equation.
k. Accounts Receivable 700 Fees Earned 700
l. Unearned Rent 700 Fees Earned 700	We are reducing the Unearned Revenue, so the customer must have already paid us.

Learning Goal 8

SOLUTIONS

Learning Goal 8: Prepare Adjusting Entries for Accrued Expenses

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