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UA ACCT 200 - Chapter 3 Review

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ACCT 200 1st Edition Lecture 7Outline of Last Lecture I. Brief Exercise 3-3II. Chapter 3 NotesIII. Brief Exercise 3-6IV. Brief Exercise 3-10V. Brief Exercise 3-11VI. Brief Exercise 3-12VII. Brief Exercise 3-13VIII. Exercise 3-13Outline of Current Lecture I. Review of activity 2 answersII. Classified balance sheetIII. Review of adjusting journal entriesIV. E 3-14 a&bV. Closing entriesCurrent LecturePart 1:Debits will: increase assets, decrease liabilities, decrease common stock, decrease retained earnings, decrease revenues, increase expenses, increase dividendsCredits will: decrease assets, increase liabilities, increase common stock, increase retained earnings, increase revenues, decrease expenses, decrease dividendsPart 2:1. Cash dr 2000, common stock cr 20002. Acct receivable dr 4000, service revenue cr 40003. Cash dr 2000, unearned revenue cr 20004. Supplies dr 1000, acct payable cr 10005. Dividends dr 3000, cash cr 3000Part 3:a. Assets: not change (or increase and decrease)Liabilities: not changeEquity: not changeb. Assets: decreaseLiabilities: not changeEquity: decreasec. Assets: increaseLiabilities: increaseEquity: not changePart 4:Cash: balance sheet, drRevenues: income statement, crAccounts payable: balance sheet, crInventory: balance sheet, drUnearned revenue: balance sheet, crInsurance expense: income statement, drWages expense: income statement, drPrepaid insurance: balance sheet, drLong term notes payable: balance sheet, crCommon stock: balance sheet and statement of stockholders equity, crClassified Balance Sheet: Use/convert to cash within 12 months=current assetPay within 12 months=current liabilityIf it’s not current, then it’s long-termHave certain subtotals:Total current assetsNet property, plant and equipmentTotal assetsTotal current liabilitiesTotal liabilitiesTotal equityTotal liabilities and equityReview of adjusting journal entries:Prepaid expenses (supplies, prepaid insurance, prepaid rent)Original entry: dr prepaid insurance, cr cashAdjusting entry: dr insurance exp (increase expense/decrease equity), cr prepaid insurance (decrease asset)Only adjust for amount that has been usedAdjusting entries NEVER change cash account!!!Examples:Prepaid/unearned revenue (cash in advance)Original: dr cash, cr unearned revenueAdjusting entry: dr unearned revenue, cr service revenueDepreciation – we record to show usage of long term equipment, such as vehiclesAdjusting entry: dr depreciation expense, cr accumulated depreciation(Accumulated depreciation is a contra asset – listed with the assets but is subtracted from assets)Equipment: 100,000 drAccumulated depreciation: 10,000 crNet equipment: 90,000 net value (dr)Accrued revenues – revenue earned but not recorded (interest on investments, record a sale on account)Adjusting entry: dr acct receivable, cr revenueAccrued expenses – have been incurred but not yet recordedAdjusting entry: dr expense (wages due), cr liability 2 types of questions you could see on an exam:a. “record depreciation expense” – dr depreciation expense, cr accumulated depreciationb. “what is the impact on the accounting equation?” – decrease assets and decrease equitySay beginning balance is 10,000 cr, depreciation expense/accumulated depreciation is 5000; ending balance after adjusting entry is 15,000; net value=50,000 asset – 15,000 balance=35,000 net value on balance sheetE 3-14 a. $6000 prepaid rent - - 6 months, $1000/monthDr rent expense 2000Cr prepaid rent 2000(2 months) Rent expense Prepaid rent 2000 6000 2000 2000 4000b. Dr unearned revenue 500Cr service revenue 500 Unearned revenue Service revenue 2000 45,000500 500 1500 45,500Closing entries:Resets balance to 0 at end of year for revenues, expenses, and


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UA ACCT 200 - Chapter 3 Review

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