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    Please complete the attached practice problems. Use the attached excel template for practice problem number 7.

    1) 3. Define accrual accounting and contrast it with cash basis accounting.

    2) 4. What four conditions must normally be met for revenue to be recognized under accrual basis

    3) 2. Identify and state two generally accepted accounting principles that relate to adjusting the accounts.

    4) 8. What accounts does a company debit and credit in a prepaid expense adjusting entry?

    5) 10. Explain the differences between depreciation expense and accumulated depreciation.

    6) 12. What accounts are debited and credited in an unearned revenue adjusting entry?

    7) P4-3A The Julien Hotel opened for business on May 1, 2007. Here is its trial balance
    before adjustment on May 31.
    Trial Balance
    May 31, 2007
    Debit Credit
    Cash $ 2,500
    Prepaid Insurance 1,800
    Supplies 2,600
    Land 15,000
    Lodge 70,000
    Furniture 16,800
    Accounts Payable $ 4,700
    Unearned Rent Revenue 3,300
    Mortgage Payable 36,000
    Common Stock 60,000
    Rent Revenue 9,000
    Salaries Expense 3,000
    Utilities Expense 800
    Advertising Expense 500
    $113,000 $113,000
    Other data:
    1. Insurance expires at the rate of $300 per month.
    2. An inventory of supplies shows $1,350 of unused supplies on May 31.
    3. Annual depreciation is $3,600 on the lodge and $3,000 on furniture.
    4. The mortgage interest rate is 9%. (The mortgage was taken out on May 1.)
    5. Unearned rent of $1,500 has been earned.
    6. Salaries of $750 are accrued and unpaid at May 31.
    (a) Journalize the adjusting entries on May 31.
    (b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the
    adjusting entries.
    (c) Prepare an adjusted trial balance on May 31.
    (c) Rent revenue $ 10,500
    Tot. trial
    balance $114,570
    (d) Prepare an income statement and a retained earnings statement for the month of
    May and a classified balance sheet at May 31.
    (e) Identify which accounts should be closed on May 31.

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