Let\'s start with Exercise 3-22A and practice developing journal entries to make
ID: 2451389 • Letter: L
Question
Let's start with Exercise 3-22A and practice developing journal entries to make adjustments. Select one of the six transactions and develop the adjusting journal entry
An accountant made the following adjustments at December 31, the end of the accounting period:
a. Prepaid insurance, beginning, $400. Payments for insurance during the period, $1,200. Prepaid insurance, ending, $700.
b. Interest revenue accrued, $1,600.
c. Unearned service revenue, beginning, $1,100. Unearned service revenue, ending, $500.
d. Depreciation, $4,800.
e. Employees’ salaries owed for three days of a five-day work week; weekly payroll, $18,000.
f. Income before income tax, $21,000. Income tax rate is 25% .
Explanation / Answer
Under the cash basis of accounting...
Under the accrual basis of accounting...
The accrual basis of accounting provides a better picture of a company's profits during an accounting period. The reason is that the income statement prepared under the accrual basis will report all of the revenues actually earned during the period and all of the expenses incurred in order to earn the revenues.
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