Posted: May 5th, 2016

Adjustment entries involve revenue or expense accounts but never affect the cash account?

Requirement 1
Make the necessary entries to journalize these transactions for the month of February.

Requirement 2
On February 28, Jones takes the following facts into account:

I. Feb. 28, 20×1. The supplies account had a balance of $910 on Feb. 1, 20×1. Some supplies were used during the month. Jones determines that the original cost of the remaining supplies is $260.
j. Jones accrues an additional $30 in wages for the hours that Dave worked on Monday, February 28, 20×1; Dave’s wage for that pay period is scheduled for payment on Friday, March 4, 20×1.
k. Feb. 28, 20×1. Jones considers the prepayment made for advertising services on Feb. 2, 20×1, and makes an entry to account for advertising expense for the month of February, 20×1.
l. Feb. 28, 20×1. Interest of $1220 has accrued on the note payable. The interest is scheduled for payment early in March.

Requirement 3
Using an accounting worksheet, Jones prepares a trial balance before making adjustments. Compute the worksheet,
showing the adjustments, and compute the ending (adjusted) balance amounts. Label each adjustment in parenthesis (i) – (l).

Requirement 4
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.

Requirement 5
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?

Requirement 6
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?

Requirement 7
Adjustment entries involve revenue or expense accounts but never affect the cash account. True or False?

Requirement 8
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.