ACCRUAL/ ADJUSTMENT ACCOUNT AFFECTED ACCRUAL ACCOUNT Debit Credit 1. DEPRECIATION EXPENSE Accrual 674300 BUILDINGS & EQUIPMENT Accural 674300 2. SALARY EXPENSE Accural 39123 SALARIES PAYABLE Accural 39123 3. BUILDINGS & EQUIPMENT Accural 29049 EXPENDITURES Modified 29049 4. BONDS PAYABLE Accural 50000 ACCRUED INTEREST Accural 1125 PAYABLE INTEREST EXPENSE Accural 1125 EXPENDITURES—PRINCIPAL Modified 50000 EXPENDITURES—INTEREST
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ACCT201/EXERCISE QUESTION 4/CH.3 Question DMD.‚ opened a dental clinic on August 1‚ 2007. The business transactions for August are shown below: |Aug 1 |Dr. Cravati invested $280‚000 cash in the business in exchange for 1‚000 shares of capital stock. | |Aug 1 |Rented an office and paid 3-month rent in advance‚ $2‚000 | |Aug 4 |Land and building were purchased for $400‚000. Of this amount‚ $60‚000
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liabilities. The total expenses must also be identified. Expenses are obviously the opposite of revenue. It represents the outflow of economic benefits. The profit is then easily calculated by taking the generated revenue over a particular period of time and from it deduct the total expenses incurred in generating that revenue. The final result form the mathematical equation will be either a profit or a loss. If the revenue is more than the expenses = profit and if the expenses are more than the profit
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* Depreciation expense - increases * Increase in investments - decreases * Decrease in accounts payable - decrease * Decrease in prepaid expenses - increases * Increase in inventory - decreases * Dividend payment - decreases * Increase in accrued expenses - decreases The Rogers Corporation has a gross profit of $880‚000 and $360‚000 in depreciation expenses. The Evans Corporation also has $880‚000 in gross profit‚ with $60‚000 in depreciation expense. Selling
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information include: a. b. c. lenders prospective owners customers d. e. labor unions all of the above 4. Expenses can be found in the: a. b. c. statement of owner’s equity income statement balance sheet d. e. both b and c all of the above 5. This account does not appear on the income statement: a. b. c. accumulated depreciation depreciation expense sales revenue d. e. marketing expense interest expense 6. A brand new company has a building costing $10‚000‚ machinery costing $5‚000‚ cash of $700‚ and
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customers Expenses can be found in the: a. b. c. 5. balance sheet balance sheet and journals balance sheet and income statement income statement none of the above External users of financial accounting information include: a. b. c. 4. d. observing e. classifying The financial statement or statements that pertain to a stated period of time is (are) the: a. b. c. d. e. 3. interpreting reporting purchasing accumulated depreciation depreciation expense sales
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MULTIPLE CHOICE 1. The balance sheet reports a. assets. b. revenue. c. expenses. d. net income. ANS: A DIF: Easy OBJ: LO 5-1 MSC: AACSB Communication 2. The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the a. Income Statement columns. b. Adjustments columns. c. Balance Sheet columns. d. Adjusted Trial Balance columns. ANS: A DIF: Easy OBJ: LO 5-2 MSC: AACSB Communication 3. The third pair of columns on a 10-column work sheet prepared at the
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| Land | 5‚500 | | | | Total long-term liabilities | 420‚000 | | Land improvements | 6‚500 | | | | | | | Buildings | 180‚000 | | | | | | | Equipment | 201‚000 | | Total liabilities | 481‚000 | | Less: accum depreciation | (56‚000) | | | | | | Prop‚ plant & equip - net | 337‚000 | | | | | - | Intangible assets | | | STOCKHOLDERS’ EQUITY | | | Goodwill | 105‚000 | | | Common stock | 110‚000 | | Trade names | 200‚000 | |
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calendar year or fiscal year. 5. Accrual Basis Concept - Income is recorded when earned‚ whether or not cash is received. - Expense is recognized when incurred‚ whether or not payment is made. 6. Revenue Realization Concept - Income is considered when services are fully rendered. - Income is considered when the goods / merchandise are fully delivered. 7. Matching Concept - Expenses incurred to generate revenues must be recorded in the same period that the income is recorded to properly determine net
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with a long-term supply agreement which was part of their restructuring plans. The other change was to use the straight-line method for the computation of depreciation expenses for plants‚ machinery and equipment. This changed method of computing depreciation made their net income rise by $11 million. 2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years? Depending on the useful life of the asset
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