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Acc 280 Week 3 Exercise

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Accounting

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Homework

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Acc 280 Week 3 Exercises
Chapter 3 / Questions
#2. State two generally accepted accounting principles that relate to adjusting the
accounts.
Matching Principles is where the expenses could be coordinated with revenues.
Revenue Recognition Principle states that an accountant should acknowledged
revenue because it is the principle that deals with what has been earned in the
accounting period.
#3. Rick Marsh, a lawyer, accepts a legal engagement in March, performs the work
in April, and is paid in May. If Marsh’s law firm prepares monthly financial statements,
when should it recognize revenue from this engagement? Why?
Rick should recognize revenue in April because this is the month that the revenue
was earned. Reason being is that the questions states what month the revenues
earned which is April.

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#4. Why do accrual-basis financial statements provide more useful information than
cash-basis statements?
Accrual-basis financial statements is more useful than a cash- basis statement
because when using the accrual- basis you can reveal the future information needed
for revenues that have been earned and can be earned.
#8. Distinguish between the two categories of adjusting entries, and identify the
types of adjustments applicable to each category.
The two categories for adjusting entries are accrual and deferrals. Accruals deals
with revenues and expenses while Deferrals deals with prepaid expenses and
revenues.
Chapter 3 / E3-7
The ledger of Piper Rental Agency on March 31 of the current year includes the
following selected accounts before adjusting entries have been prepared.
First entries for the adjustments:
1. D Depreciation expenses $400*3=$1200
_________C Depreciation - Equipment $1200
2. D Unearned rent revenue $9900/3=$3300
_________C Rent revenue $3300
3. D Interest expenses $500
_________C Interest payable $500
4. D Supplies expenses $2800 (in supplies account before adjustments)-$700 (on
hand actual) =$2100
__________C Supplies $2100
5. D Insurance expense $200*3=$600
__________C Prepaid insurance $600

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Balances of the accounts after adjustments:
___________________Debit Credit
Prepaid insurance $3000
Supplies 700
Equipment 25000
Accumulated depreciation equipment $9600
Notes payable ___________________ 20000
Unearned rent____________________ 6600
Rent revenue_____________________ 63300
Interest expenses 500
Wages expenses 14000
Depreciation expenses 1200
Supplies expenses 2100
Insurance expenses 600
Chapter 3 / E3-8
Andy Wright, D.D.S., opened a dental practice on January 1, 2008. During the first
month of operations the following transactions occurred.
DR=Debit CR=credit
1.
DR: accounts receivable $875
CR:Service revenue 875
2.
DR:Utility Expense $520
CR:Utilities payable 520
3.

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