1. (8 Points) one example of each. Define the terms accrual and deferral in refe
ID: 2340659 • Letter: 1
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1. (8 Points) one example of each. Define the terms accrual and deferral in reference to adjusting journal entries. Give 2. (12 Points) Your examination of Engel Company's records provides the following information for the December 31, 2013, year-end adjustments. Required: Prepare the adjusting entries to record each transaction a. Bad debts are to be recorded at 2% of sales. Sales made on credit totaled $25,000 for the year. b. Salaries at year-end that have accumulated but have not been paid total $1,400. c. Annual straight-line depreciation for the company's equipment is based on a cost of $30,000, an estimated life of 8 years, and an estimated residual value of $2,000. d. Prepaid insurance in the amount of $800 has expired.Explanation / Answer
I am solving first 2 questions since as per policy we have to solve only one
1)Accrual means recognizing revenue or expense before a payment or receipt and Deferral means delay in the recognizing revenue or expense.
Example of accrual expense we have to pay salaries of august in September so in august it is a liability and when payment made the liability is removed
Salaries expense(db)100
Salaries payable(db)100
Adjusting entry:
Cash(db) 100
Salaries payable(cr)100
Deferal revenue means cash received in advance for a work which will be done later
Cash(db)100
Unearned revenue(cr) 100
Adjusting entry:
Unearned revenue(db)100
Service revenue(Cr)100
2)
a)bad debt expense(db) 2%*25000=500
account receivable(Cr) 500
b) salaries payable(db)1400
cash(cr)1400
c)depreciation=(cost-salvage)/years=(30000-2000)/8=3500
depreciation expense(db) 3500
accumulated depreciation(cr)3500
d) insurance expense(db)800
prepaid insurance(cr)800
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