Posted: May 5th, 2016
Prepare an income statement, a statement of owners’ equity, and a balance sheet for Jake’s Computer Repair Service for the months ended February 28, 20x!. Use the adjusted trial balance amounts you computed in Requirement 3, and the template below.
Jones recognizes utilities expense as soon as the utilities bill arrives, and recognizes service revenues only when the related service is performed (refer back to transaction c and e in Requirement (4). Which basis of accounting is Jones correctly applying?
Jones makes adjustments at month-end to assign revenues to the period in which they were earned and to assign expenses to the period in which they are incurred. As a result, revenues earned in February are reported together with the expenses incurred to generate those revenues. Which accounting principle or concept is Jones correctly applying?
Adjustment entries involve revenue or expense accounts but never affect the cash account. True or False?
Jones accrues interest on the note payable with an adjusting entry. Explain the effect on the income statement if Jones had failed to make this entry.
True or false? The cash basis of accounting is required under Generally Accepted Accounting Principles (GAAP) when preparing financial statements. Explain, if necessary.
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