ACC280 E3-4 Emeril Corporation (Accrual or prepayment)-ANSWER KEY (INSTANT DOWNLOAD)

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Solution Guide / Answer Key:

Acc280 Financial Accounting

(Acc557 Strayer)

Chapter 3 Adjusting the Accounts

Exercise 3-4

Emeril Corporation encounters the following situations:

Instructions

Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense, accrued revenue) is needed in each situation, at December 31, 2008.

1. Emeril collects $1,000 from a customer in 2008 for services to be performed in 2009.

2. Emeril incurs utility expense which is not yet paid in cash or recorded.

3. Emeril's employees worked 3 days in 2008, but will not be paid until 2009.

4. Emeril earned service revenue but has not yet received cash or recorded the transaction.

5. Emeril paid $2,000 rent on December 1 for the 4 months starting December 1.

6. Emeril received cash for future services and recorded a liability until the revenue was earned.

7. Emeril performed consulting services for a client in December 2008. On December 31, it billed the client $1,200.

8. Emeril paid cash for an expense and recorded an asset until the item was used up.

9. Emeril purchased $900 of supplies in 2008; at year-end, $400 of supplies remain unused.

10. Emeril purchased equipment on January 1, 2008; the equipment will be used for 5 years.

11. Emeril borrowed $10,000 on October 1, 2008, signing an 8% one-year note payable.

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