Prepaid Adjustments

Question 1

What are the three ways prepayments can be adjusted for?

Answer 1

1. Permanents
2. Temporary
3. Unadjusted Trial Balance

Question 2

On May 1st, KLM purchased a 1 year advertising campaign commencing on the same day

Recorded payment was to a permanent account - adjusting entry on 12/31

Answer 2

5/1 Debit PPAD 24000,
Credit Cash 24000
(8 months have passed)
12/31 Debit Ad. Exp. 16,000,
Credit PPAD 16,000

Question 3

On May 1st, KLM purchased a 1 year advertising campaign commencing on the same day

Record payment was to a temporary account - adjusting entry on 12/31

Answer 3

5/1 Debit to Ad. Exp. 24,000
Credit to Cash 24,000
(8 months passed)
12/31 Debit to PPAD 8,000
Credit to Ad. Exp 8,000

Question 4

On May 1st, KLM purchased a 1 year advertising campaign commencing on the same day

Displayed on unadjusted trial balance - adjusting entry on 12/31

Answer 4

Adjust the expense account and prepaid account accordingly

Question 5

the company lent $50,000, 12%, 8 month note to a customer on August1st.
Record the adjusting entry for 3/31 with reversing entry
50,000*0.12=6000/12=500

Answer 5

debit cash 54,000
Credit notes rec. 50,000
credit int. rev. 4000

Question 6

the company lent $50,000, 12%, 8 month note to a customer on August1st.
Record the adjusting entry for 12/31 without reversing entry
50,000*0.12=6000/12=500

Answer 6

debit 54,000
credit notes rec. 50,000
credit int. rec. 2500
credit int. rev. 1500

Question 7

the company lent $50,000, 12%, 8 month note to a customer on August1st.
Record the adjusting entry for 12/31
50,000*0.12=6000/12=500

Answer 7

Debit interest receivable 2500
credit interest revenue 2500

Question 8

The employees work a 5 day work week and are paid every Friday for the work performed through Friday. 12/31/24 is a Monday.
Record the adjusting entry for 12/31
$5600 daily $28000 weekly

Answer 8

Debit sal. exp. 5600
credit sal. pay. 5600

Question 9

The employees work a 5 day work week and are paid every Friday for the work performed through Friday. 12/31/24 is a Monday.
Record the adjusting entry for 1/4/25 with reversing entry
$5600 daily $28000 weekly

Answer 9

1/1
debit sal. pay. 5600
credit sal. exp. 5600

1/4
debit sal. exp. 28000
credit cash 28000

Question 10

The employees work a 5 day work week and are paid every Friday for the work performed through Friday. 12/31/24 is a Monday.
Record the adjusting entry for 1/4/25 with out reversing entry
$5600 daily $28000 weekly

Answer 10

1/4
debit sal. exp. 22,400
debit sal. pay. 5600
credit cash 28000

Question 11

Unadjusted trial balance shows:
buildings: 1,000,000
accumulated depreciation - building: 210,000
depreciation expense - building: 22500
Buildings have 400,000 salvage value and a 20 yr life

record the adjusting entry for 12/31/24

Answer 11

1,000,000 - 400,000 = 600,000 / 20 =
30,000 annual depreciation expense

debit dep. exp. 7500
credit accum. dep. 7500

Question 12

Record the issuance of stock for 1,000 stocks at $2 par value for $5000 equipment

Answer 12

Debit equipment 5000
credit common stock 2000
credit APIC 3000

Question 13

What is on an income statement?

Answer 13

Revenue - Expenses

Question 14

What is on the statement of retained earnings?

Answer 14

beginning retained earnings
+/- net income
- dividends
= ending in retained earnings

Question 15

What are the rules of debits and credits

Answer 15

Assets are debits
Liabilities and equity are credits

Question 16

debit expense 24000
credit cash 24000
(adjust)
debit PP 8000
credit exp 8000
What will happen if the adjusting entry is not made?

Answer 16

exp O
ass U
ni U
re U
equ U
rev N
lia N