Acc205 Wk 1 Assignment

Week Two Exercise Assignment

Revenue and Expenses

1. Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company’s fiscal year ends on June 30. Consider the following items and classify each as either (1) prepaid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.

a. Amounts paid on June 30 for a 1-year insurance policy.

b. Professional fees earned but not billed as of June 30.

c. Repairs to the firm’s copy machine, incurred and paid in June.

d. An advance payment from a client for a performance next month at a convention.

e. The payment in part (d) from the client’s point of view.

f. Interest owed on the company’s bank loan, to be paid in early July.

g. The bank loan payable in part (f).

h. Office supplies on hand at year-end.

2. Understanding the closing process. Examine the following list of accounts:

Interest Payable | Accumulated Depreciation: Equipment |

Alex Kenzy, Drawing | Accounts Payable |

Service Revenue | Cash |

Accounts Receivable | Supplies Expense |

Interest Expense |

Which of the preceding accounts

a. appear on a post-closing trial balance?

b. are commonly known as temporary, or nominal, accounts?

c. generate a debit to Income Summary in the closing process?

d. are closed to the capital account in the closing process?

3. Adjusting entries and financial statements. The following information pertains to Fixation Enterprises:

* The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one third of this amount had been earned.

* Fixation provided $2,500 of services to Artech Corporation; no billing had been made by December 31.

* Salaries owed to employees at year-end amounted to $1,650.

* The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were...