Learning

Learning Objectives
Objectives
After studying this chapter, you should be able to:
1. Explain the revenue recognition principle and the expense recognition
principle.
2. Differentiate between the cash basis and the accrual basis of
accounting.
3. Explain why adjusting entries are needed, and identify the major types of
adjusting entries.
4. Prepare adjusting entries for deferrals.
5. Prepare adjusting entries for accruals.
6. Describe the nature and purpose of the adjusted trial balance.
7. Explain the purpose of closing entries.
8. Describe the required steps in the accounting cycle.
9. Understand the causes of differences between net income and cash
provided by operating activities.
4-1
 Timing
Timing Issues
Issues

Accountants divide the economic life of a business into

artificial time periods (Periodicity Assumption).
.....
Jan. Feb. Mar. Apr. Dec.

 Generally a month, a quarter, or a year.

 Fiscal year vs. calendar year

LO 1 Explain the revenue recognition principle

4-2
and the expense recognition principle.
 Timing
Timing Issues
Issues

Review Question
What is the periodicity assumption?
a. Companies should recognize revenue in the
accounting period in which it is earned.
b. Companies should match expenses with revenues.
c. The economic life of a business can be divided into
artificial time periods.
d. The fiscal year should correspond with the calendar
year.

LO 1 Explain the revenue recognition principle

4-3
and the expense recognition principle.
 Timing
Timing Issues
Issues

The Revenue Recognition Principle

Companies recognize
revenue in the accounting
period in which the
performance obligation is
satisfied.

LO 1 Explain the revenue recognition principle

4-4
and the expense recognition principle.
 Timing
Timing Issues
Issues

Illustration: Assume Conrad Dry Cleaners cleans clothing

on June 30, but customers do not claim and pay for their
clothes until the first week of July. The journal entries for
June and July would be:

LO 1 Explain the revenue recognition principle

4-5
and the expense recognition principle.
 Timing
Timing Issues
Issues

Illustration 4-1 (Partial)

“Let the expenses follow the revenues.”

LO 1 Explain the revenue recognition principle

4-6
and the expense recognition principle.
 Timing
Timing Issues
Issues
Illustration 4-1 GAAP
relationships in revenue
and expense recognition

LO 1 Explain the revenue recognition principle

4-7
and the expense recognition principle.
 Timing
Timing Issues
Issues

Accrual versus Cash Basis of Accounting

Accrual-Basis Accounting
► Transactions recorded in the periods in which the
events occur.

► Revenues are recognized when services performed,

even if cash was not received.

► Expenses are recognized when incurred, even if cash

was not paid.

4-8
LO 2 Differentiate between the cash basis
and the accrual basis of accounting.
 Timing
Timing Issues
Issues

Accrual versus Cash Basis of Accounting

Cash-Basis Accounting
► Revenues are recognized only when cash is received.

► Expenses are recognized only when cash is paid.

► Prohibited under generally accepted accounting

principles (GAAP).

4-9
LO 2 Differentiate between the cash basis
and the accrual basis of accounting.
 Timing
Timing Issues
Issues
Illustration: Suppose that Fresh Colors paints a large
building in 2013. In 2013, it incurs and pays total expenses
(salaries and paint costs) of $50,000. It bills the customer
$80,000, but does not receive payment until 2014.
Illustration 4-2 (Partial)

2013 2014

4-10
LO 2 Differentiate between the cash basis
and the accrual basis of accounting.
 Timing
Timing Issues
Issues

Review Question
Which one of these statements about the accrual basis of accounting
is false?
a. Companies record events that change their financial statements
in the period in which events occur, even if cash was not
exchanged.
b. Companies recognize revenue in the period in which the
performance obligation is satisfied.
c. This basis is in accord with generally accepted accounting
principles.
d. Companies record revenue only when they receive cash, and
record expense only when they pay out cash.

4-11
LO 2 Differentiate between the cash basis
and the accrual basis of accounting.
 The
The Basics
Basics of
of Adjusting
Adjusting Entries
Entries

Adjusting entries
 ensure that the revenue recognition and expense
recognition principles are followed.
 are required every time a company prepares financial
statements.
 includes one income statement account and one
balance sheet account.
 never include cash.

4-12
LO 3 Explain why adjusting entries are needed, and
identify the major types of adjusting entries
 The
The Basics
Basics of
of Adjusting
Adjusting Entries
Entries

Review Question
Adjusting entries are made to ensure that:
a. expenses are recognized in the period in which they
are incurred.
b. revenues are recognized in the period in which the
performance obligation is satisfied.
c. balance sheet and income statement accounts have
correct balances at the end of an accounting period.
d. All of the above.

4-13
LO 3 Explain why adjusting entries are needed, and
identify the major types of adjusting entries
 Types
Types of
of Adjusting
Adjusting Entries
Entries
Illustration 4-3
Categories of adjusting entries
Deferrals:
1. Prepaid expenses: Expenses paid in cash and recorded as
assets before they are used or consumed.
2. Unearned revenues: Cash received before service are
performed.
Accruals:
1. Accrued revenues: Revenues for services performed but not
yet received in cash or recorded.
2. Accrued expenses: Expenses incurred but not yet paid in
cash or recorded.

4-14
LO 3 Explain why adjusting entries are needed, and
identify the major types of adjusting entries
 Types
Types of
of Adjusting
Adjusting Entries
Entries

Trial Balance –
Each account is
analyzed to
determine
whether it is
complete and up-
to-date.

Illustration 4-4

4-15
LO 3 Explain why adjusting entries are needed, and
identify the major types of adjusting entries
 Adjusting
Adjusting Entries
Entries for
for Deferrals
Deferrals

Deferrals are either:

 Prepaid expenses

OR

 Unearned revenues.

4-16 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Payment of cash, that is recorded as an asset because

service or benefit will be received in the future.

Cash Payment BEFORE Expense Recorded

Prepayments often occur in regard to:

 insurance  rent
 supplies  equipment
 advertising  buildings

4-17 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Prepaid Expenses
 Costs that expire either with the passage of time or
through use.

 Adjusting entry results in an increase (a debit) to an

expense account and a decrease (a credit) to an asset
account.

4-18 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Adjusting entries for prepaid expenses

Illustration 4-5

 Increases (debits) an expense account and

 Decreases (credits) an asset account.

4-19 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Illustration: Sierra Corporation purchased supplies costing $2,500

on October 5. Sierra recorded the purchase by increasing (debiting)
the asset Supplies. This account shows a balance of $2,500 in the
October 31 trial balance. An inventory count at the close of business
on October 31 reveals that $1,000 of supplies are still on hand.

Oct. 31 Supplies Expense 1,500

Supplies 1,500
($2,500 – 1,000 = $1,500)
Illustration 4-6 (Partial)

4-20 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Illustration: On October 4, Sierra Corporation paid $600 for a one-

year fire insurance policy. Coverage began on October 1. Sierra
recorded the payment by increasing (debiting) Prepaid Insurance.
This account shows a balance of $600 in the October 31 trial balance.
Insurance of $50 ($600 ÷ 12) expires each month.

Oct. 31 Insurance Expense 50

Prepaid Insurance 50

Illustration 4-7 (Partial)

4-21 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Depreciation
 Buildings, equipment, and motor vehicles (long-lived
assets) are recorded as assets, rather than an expense,
in the year acquired.

 Companies report a portion of the cost of a long-lived

asset as an expense (depreciation) during each period of
the asset’s useful life.

 Depreciation does not attempt to report the actual

change in the value of the asset.

4-22 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Illustration: For Sierra Corporation, assume that depreciation on

the office equipment is $480 a year, or $40 per month.

Oct. 31 Depreciation Expense 40

Accumulated Depreciation-Equipment 40

Illustration 4-8 (Partial)

4-23 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Statement Presentation
 Accumulated Depreciation-
Equipment is a contra asset
account.
 Appears just after the account it
offsets (Equipment) on the
balance sheet.
Illustration 4-9

4-24 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”

Summary
Illustration 4-10

4-25 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”

Receipt of cash recorded as a liability before services are

performed.

Cash Receipt BEFORE Revenue Recorded

Unearned revenues often occur in regard to:

 rent  magazine subscriptions
 airline tickets  customer deposits

4-26 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”

Unearned Revenues
 Adjusting entry to record the revenue that has been
earned and to show the liability that remains.

 Adjusting entry results in a decrease (a debit) to a

liability account and an increase (a credit) to a revenue
account.

4-27 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”

Adjusting entries for unearned revenues

Illustration 4-11

 Decrease (a debit) to a liability account and

 Increase (a credit) to a revenue account.

4-28 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”

Illustration: Sierra Corporation received $1,200 on October 2 from

R. Knox for guide services for multi-day trips expected to be
completed by December 31. Unearned Service Revenue shows a
balance of $1,200 in the October 31 trial balance. From an evaluation
of the service Sierra performed for Knox during October, the company
determines that it has earned $400 in October.

Oct. 31 Unearned Service Revenue 400

Service Revenue 400
Illustration 4-12 (Partial)

4-29 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”

Summary Illustration 4-13

ACCOUNTING FOR UNEARNED REVENUES

Reason for Accounts Before Adjusting

Examples
Adjustment Adjustment Entry
Rent, magazine Unearned Liabilities overstated. Dr. Liabilities
subscriptions, Revenues recorded Revenues understated. Cr. Revenues
customer deposits in liability accounts
for future service are now recognized
as revenue for
services performed

4-30 LO 4 Prepare adjusting entries for deferrals.

 Adjusting
Adjusting Entries
Entries for
for Accruals
Accruals

Made to record:

 Revenues earned and

OR

 Expenses incurred

in the current accounting period that have not been

recognized through daily entries.

4-31 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Revenues”
Revenues”

Revenues for services performed but not yet received in cash or recorded.

Adjusting entry results in:

Revenue Recorded BEFORE Cash Receipt

Accrued revenues often occur in regard to:

 rent
 interest
 services performed

4-32 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Revenues”
Revenues”

Accrued Revenues

An adjusting entry serves two purposes:

(1) Shows the receivable that exists, and

(2) Records the revenues for services performed.

4-33 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Revenues”
Revenues”

Adjusting entries for accrued revenues

Illustration 4-14

 Increases (debits) an asset account and

 Increases (credits) a revenue account.

4-34 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Revenues”
Revenues”

Illustration: In October, Sierra Corporation performed guide

services for $200 that were not billed to clients before October
31.

Oct. 31 Accounts Receivable 200

Service Revenue 200

Illustration 4-15

4-35 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Revenues”
Revenues”

Summary Illustration 4-16

Illustration 4-16

ACCOUNTING FOR ACCRUED REVENUES

Reason for Accounts Before Adjusting

Examples
Adjustment Adjustment Entry
Interest, rent, Services performed Assets understated. Dr. Assets
services performed but not yet received Revenues understated. Cr. Revenues
but not collected in cash or recorded

4-36 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Expenses incurred but not yet paid in cash or recorded.

Adjusting entry results in:

Expense Recorded BEFORE Cash Payment

Accrued expenses often occur in regard to:

 rent  taxes
 interest  salaries

4-37 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Accrued Expenses

An adjusting entry serves two purposes:

(1) Records the obligations, and

(2) Recognizes the expenses.

4-38 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Adjusting entries for accrued expenses

Illustration 4-17

 Increases (debits) an expense account and

 Increases (credits) a liability account.

4-39 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Illustration: Sierra Corporation signed a three-month note
payable in the amount of $5,000 on October 1. The note
requires Sierra to pay interest at an annual rate of 12%.
Illustration 4-18

Oct. 31 Interest Expense 50

Interest Payable 50
Illustration 4-19 (Partial)

4-40 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Illustration: Sierra Corporation last paid salaries on October 26;

the next payment of salaries will not occur until November 9. The
employees receive total salaries of $2,000 for a five-day work
week, or $400 per day. Thus, accrued salaries at October 31 are
$1,200 ($400 × 3 days).
Illustration 4-20

4-41 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Illustration: Sierra Corporation last paid salaries on October 26;

the next payment of salaries will not occur until November 9. The
employees receive total salaries of $2,000 for a five-day work
week, or $400 per day. Thus, accrued salaries at October 31 are
$1,200 ($400 x 3 days).

Oct. 31 Salaries and Wages Expense 1,200

Salaries and Wages Payable 1,200
Illustration 4-21

4-42 LO 5 Prepare adjusting entries for accruals.

 Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”

Summary Illustration 4-22

4-43 LO 5 Prepare adjusting entries for accruals.

 Summary
Summary of
of Basic
Basic Relationships
Relationships
Illustration 4-23
Summary of adjusting
entries

4-44 LO 5 Prepare adjusting entries for accruals.

 The
The Adjusted
Adjusted Trial
Trial Balance
Balance

After all adjusting entries are journalized and posted the

company prepares another trial balance from the ledger
accounts (Adjusted Trial Balance).

The adjusted trial balance’s purpose is to prove the equality of

debit balances and credit balances in the ledger.

The adjusted trial balance is the primary basis for the

preparation of the financial statements.

4-45 LO 6 Describe the nature and purpose of the adjusted trial balance.
 The
The Adjusted
Adjusted Trial
Trial Balance
Balance

Review Question
Which of the following statements is incorrect concerning the
adjusted trial balance?
a. An adjusted trial balance proves the equality of the total
debit balances and the total credit balances in the ledger
after all adjustments are made.
b. The adjusted trial balance provides the primary basis for the
preparation of financial statements.
c. The adjusted trial balance lists the account balances
segregated by assets and liabilities.
d. The adjusted trial balance is prepared after the adjusting
entries have been journalized and posted.

4-46 LO 6 Describe the nature and purpose of the adjusted trial balance.
 Preparing
Preparing Financial
Financial Statements
Statements

Financial
Financialstatements
statements are
are prepared
prepareddirectly
directly from
from the
the
Adjusted
AdjustedTrial
Trial Balance.
Balance.

Retained
Income Balance
Earnings
Statement Sheet
Statement

4-47 LO 6 Describe the nature and purpose of the adjusted trial balance.
 Preparing
Preparing Financial
Financial Statements
Statements
Illustration 4-27

4-48
 Preparing
Preparing Financial
Financial Statements
Statements

Illustration 4-28
4-49
 Closing
Closing the
the Books
Books

At the end of the accounting period, companies transfer the

temporary account balances to the permanent stockholders’
equity account—Retained Earnings.
Illustration 4-29

4-50 LO 7 Explain the purpose of closing entries.

 Closing
Closing the
the Books
Books

In addition to updating Retained Earnings to its correct ending

balance, closing entries produce a zero balance in each
temporary account.
Illustration 4-30

4-51 LO 7 Explain the purpose of closing entries.

 Closing
Closing the
the Books
Books

2014

Illustration 4-31

4-52
 Closing
Closing the
the Books
Books

Illustration 4-32
Posting of
closing entries

4-53 LO 7 Explain the purpose of closing entries.

 Preparing
Preparing aa Post-Closing
Post-Closing Trial
Trial Balance
Balance

The purpose of the post-closing trial balance is to prove

the equality of the permanent account balances that the
company carries forward into the next accounting period.

All temporary accounts will have zero balances.

4-54 LO 7 Explain the purpose of closing entries.

 Summary
Summary of
of the
the Accounting
Accounting Cycle
Cycle
Illustration 4-33
1. Analyze business transactions Required steps in the
accounting cycle

9. Prepare a post-closing 2. Journalize the

trial balance transactions

8. Journalize and post

3. Post to ledger accounts
closing entries

7. Prepare financial
4. Prepare a trial balance
statements

6. Prepare an adjusted trial 5. Journalize and post

balance adjusting entries:
Deferrals/Accruals

4-55 LO 8 Describe the required steps in the accounting cycle.

 Using
Using aa Worksheet
Worksheet
Illustration 4-24
General journal
showing adjusting
entries 2012

Adjusting
Journal
Entries

4-56
 Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
2. Enter the Adjustments in the Adjustments Columns
Adjusted Income
Trial Balance Adjustments Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Supplies 2,500 (a) 1,500
Prepaid Insurance 600 (b) 50
Equipment 5,000 Adjustments Key:
Notes Payable 5,000
Accounts Payable 2,500
(a) Supplies Used.
Unearned Service Revenue 1,200 (d) 400 (b) Insurance Expired.
Common Stock 10,000
Dividends 500 (c) Depreciation Expensed.
Service Revenue 10,000 (d) 400 (d) Service Revenue Earned.
(e) 200
Salaries & Wages Exp. 4,000 (g)1,200 (e) Service Revenue Accrued.
Rent Expense 900 (f) Interest Accrued.
Totals 28,700 28,700
Supplies Expense (a) 1,500 (g) Salaries Accrued.
Insurance Expense (b) 50
Accumulated Depreciation (c) 40
Depreciation Expense (c) 40
Accounts Receivable (e) 200
Interest Expense (f)
50
Enter adjustment amounts, total
Interest Payable (f) 50 adjustments columns,
(g) 1,200
Salaries and Wages Payable and check for equality.
Totals 3,440 3,440

Add additional accounts as needed. LO 10 Describe the purpose and the

4-57 basic form of a worksheet.
 Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
3. Complete the Adjusted Trial Balance Columns
Adjusted Income
Trial Balance Adjustments Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Service Revenue 1,200 (d) 400 800
Common Stock 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600
(e) 200
Salaries & Wages Exp. 4,000 (g)1,200 5,200
Rent Expense 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500
Insurance Expense (b) 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50
Interest Payable (f) 50 50
Salaries and Wages Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190

Total the adjusted trial balance

columns and check for equality. LO 10 Describe the purpose and the
4-58 basic form of a worksheet.
 Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
4. Extend Amounts to Financial Statement Columns
Adjusted Income
Trial Balance Adjustments Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Service Revenue 1,200 (d) 400 800
Common Stock 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries & Wages Exp. 4,000 (g)1,200 5,200 5,200
Rent Expense 900 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50
Salaries and Wages Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600

Extend all revenue and expense account

balances to the income statement columns.
4-59 LO 10
 Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
5. Total Columns, Compute Net Income (Loss)
Adjusted Income
Trial Balance Adjustments Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200 15,200
Supplies 2,500 (a) 1,500 1,000 1,000
Prepaid Insurance 600 (b) 50 550 550
Equipment 5,000 5,000 5,000
Notes Payable 5,000 5,000 5,000
Accounts Payable 2,500 2,500 2,500
Unearned Service Revenue 1,200 (d) 400 800 800
Common Stock 10,000 10,000 10,000
Dividends 500 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries & Wages Exp. 4,000 (g)1,200 5,200 5,200
Rent Expense 900 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50 50
Salaries and Wages Payable (g) 1,200 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590
Net Income 2,860 2,860
Totals 10,600 10,600 22,450 22,450
Compute Net Income or Net Loss.
4-60 LO 10