Solution to Practice problem 1 – Chapter 4a. Dr: Unearned revenue (L)................................................... 3,200 Rent revenue (+R, +SE)............................................ 3,200($4,800÷ 6 months = $800 per month x 4 months)This is deferred revenue because cash is received before revenue is earned.b. Account receivable (+A)....................................................... 3,000 Revenue (+R, SE+).................................................... 3,000This is accrued revenue because cash is received after revenue is earned.c. Insurance expense (+E, -SE)............................................... 700 Prepaid insurance (-A)............................................... 700(4,200*2months/12 = 700)This is deferred expense because cash is paid before expenses incur.d. Wages expense (+E, SE)................................................... 1,100 Wages payable (+L)..................................................... 1,100This is accrued expense because cash is paid after expenses incure. Depreciation expense (+E, SE).......................................... 1,000 Accumulated depreciation (+X/A).............................. 1,000($12,000 ÷ 6 years = $2,000 per year x half year usage = 1,000)This is deferred expense because cash is paid before depreciation expense incurs.f. Unearned service revenue (L)............................................ 250 Service revenue (+R, +SE)......................................... 250($1,500 x 2 months/12 = 250)This is deferred revenue because cash is received before revenue is earned.g. Property tax expense (+E, SE)........................................... 400 Property tax payable (+L)............................................. 400This is accrued expense because cash is paid after expenses incurs.h. Interest expense (+E, -SE).................................................. 300 Interest payable (+L).................................................... 300($10,000*12% = 1200 *3 months/12 months = 300This is accrued expense because cash is paid after expenses
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