Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 4 - Accrual Accounting Concepts - Brief Exercises: BE4-3

Answer

(a) Supplies of 400 USD are on hand. Supplies account shows 1,900 USD balance. (b) Service revenue earned but unmilled total 700 USD. (c) Interest of 300 USD has accumulated on a note payable. (d) Rent collected in advance totaling 1,100 USD has been earned.

Work Step by Step

(a) 1. Prepaid expenses 2. Supplies account - overstated Supplies expenses - understated (b) 1. Accrued revenues 2. Accounts receivable account (asset) - understated Revenue account - understated (c) 1. Accrued expense 2. Expenses account - understated Liability account - understated (d) 1. Unearned revenues 2. Liability account - overstated Rent revenue account - understated
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