Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question.

The Johnny Flowers Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $1,350 for six months of advertising. Johnny Flowers Law Firm recorded $1,350 in the Prepaid Advertising account.
	Accrual basisCash basis
	If Johnny Flowers Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28? Enter this value as a positive number.

Secure Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Secure Home has collected $510 from cash-paying customers. Secure Home’s remaining customers owe the business $1,030. Secure Home recorded $510 of service revenue for the year.
	Accrual basisCash basis
	If Secure Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year?

Marvelous Occasions received $2,600 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account.
	Accrual basisCash basis
	If Marvelous Occasions had recorded their service revenue using the other method, how much service revenue would they have recorded for the year?

Sweet Catering completed the following selected transactions during May 2016:
May 1: Prepaid rent for three months, $2,100 May 5: Received and paid electricity bill, $100 May 9: Received cash for meals served to customers, $3,530 May 14: Paid cash for kitchen equipment, $3,870 May 23: Served a banquet on account, $2,330 May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $900 May 31: Recorded depreciation for May on kitchen equipment, $550
	If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign.
	If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign.

Identify whether each account would appear on the Balance Sheet or the Income Statement.

Unearned Revenue - Balance Sheet Income Statement

Salaries (and Wages) Expense - Balance Sheet Income Statement

Land - Balance Sheet Income Statement

Furniture - Balance Sheet Income Statement

Interest Revenue - Balance Sheet Income Statement

Equipment - Balance Sheet Income Statement

Fill in the t-accounts for each situation and label each transaction as Deferrals/Prepaid or Accrual. Calculate the adjusted balance and use a Bal. post reference to show the ending balance of each account.

Incurred interest expense of $4,100.

Adjustment Type:

AccrualDeferrals/Prepaids

Interest Expense
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Interest Payable
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Used prepaid insurance of $1,960. The Prepaid Insurance unadjusted balance as of December 31 is $11,000.

Adjustment Type:

AccrualDeferrals/Prepaids

Insurance Expense
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Prepaid Insurance
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Employees earned $1,800 in salaries that will be paid next month. The Salaries Expense unadjusted balance as of December 31 is $6,600.

Adjustment Type:

AccrualDeferrals/Prepaids

Salaries Expense
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

Salaries Payable
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Nov. 1Nov. 15Dec. 1Dec. 31			Nov. 1Nov. 15Dec. 1Dec. 31
Bal.			Bal.

A T is drawn. The vertical line divides the account into its left and right sides. The left side of the T-account is called the debit side and the right side is called the credit side. The account name is at the top, above the horizontal line.

Journalize the adjusting entry needed at December 31 for each situation. Use the Chart of Accounts to review account names!

Used prepaid insurance of $2,800
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Depreciation for the current year includes Equipment, $1,400.
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Completed services that were paid for six months earlier, $4,800
Date	Accounts and Explanation	Debit	Credit
Nov. 1Nov. 30Dec. 1Dec. 31Jan. 1

Answer rating: 100% (QA)

Under Accrual basis Accrued Revenue Accrued expense Profit or loss Under Cash basis total cash ... View the full answer