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    Adjusting Entries and Revenue Recording

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    Problem #1
    The Ritz Manor is a popular seaside resort. A double room cost $220 for one night, in order to reserve a room, guests must pay one night's stay in advance. On each floor of the hotel, Vendalite Company operates vending machines with energy bars, juices, and other snacks for guests. Vendalite stocks the machines and collects revenue every week. Total average weekly revenue from these machines is $720. The Ritz Manor is entitled to 30% of the revenue from the machines. Vendalite sends a check to the Ritz Manor once at the end of each quarter for the resort's share of the revenue.
    1. Based on this information, what type of adjusting entries does the Ritz Manor have?
    2. How are the amounts of these adjustments determined?
    3. Which accounts are affected?

    Problems #2
    Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR),
    accrued expenses (AE), or accrued revenues (AR).
    a. To record revenue earned that was previously received as cash in advance.
    b. To record annual depreciation expense.
    c. To record wages expense incurred but not yet paid (nor recorded).
    d. To record revenue earned but not yet billed (nor recorded).
    e. To record expiration of prepaid insurance.

    In its first year of operations, Harden Co. earned $39,000 in revenues and received $33,000 cash from
    these customers. The company incurred expenses of $22,500 but had not paid $2,250 of them at yearend.
    Harden also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate
    the first year's net income under both the cash basis and the accrual basis of accounting.

    In the blank space beside each adjusting entry, enter the letter of the explanation A through F that
    most closely describes the entry:
    A. To record this period's depreciation expense.
    B. To record accrued salaries expense.
    C. To record this period's use of a prepaid
    expense.
    D. To record accrued interest revenue.
    E. To record accrued interest expense.
    F. To record the earning of previously unearned
    income.
    Homework Manager repeats all numerical Exercises on the book's Website with new numbers
    each time they are worked. It can be used in practice, homework, or exam mode.
    ______ 1. Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,280
    Salaries Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,280
    ______ 2. Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208
    Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208
    ______ 3. Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,180
    Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,180
    ______ 4. Unearned Professional Fees . . . . . . . . . . . . . . . . . . . . . 19,250
    Professional Fees Earned . . . . . . . . . . . . . . . . . . . . . . 19,250
    ______ 5. Interest Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300
    Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300
    ______ 6. Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . 38,217
    Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . 38,217

    During the year, Lola Co. recorded prepayments of expenses in asset accounts, and cash receipts of
    unearned revenues in liability accounts. At the end of its annual accounting period, the company must
    make three adjusting entries: (1) accrue salaries expense, (2) adjust the Unearned Services Revenue
    account to recognize earned revenue, and (3) record services revenue earned for which cash will be
    received the following period. For each of these adjusting entries (1), (2), and (3), indicate the account
    from a through g to be debited and the account to be credited.
    a. Accounts Receivable e. Unearned Services Revenue
    b. Prepaid Salaries f. Salaries Expense
    c. Cash g. Services Revenue
    d. Salaries Payable

    I am having a problem understanding what processes I should be using.

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    https://brainmass.com/business/accounting/adjusting-entries-revenue-recording-151005

    Solution Summary

    This solution addresses the multiple questions and explains the concepts of adjusting entries, accounts affected, prepaid expenses, unearned revenues, net income, cash basis, and accrual basis.

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