Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 3-6

Purpose:

(L.O. 4) This exercise will help you develop skill in recognizing circumstances involving accrual of revenue, accrual of expense, unearned revenue, and prepaid expense.

Instructions

Assume it is now Saturday, December 31, 2014. For each of the situations below, indicate whether (a) An accrued revenue, or (b) An accrued expense, or (c) An unearned revenue, or (d) A prepaid expense or (e) neither an accrual nor a prepayment is involved. You may use the designated letters (a), (b), (c), (d), and (e) to indicate your answers. The accounting period is the calendar year of 2014.

Answers	Situations
______ 1.	A check was written on June 2, 2014, for $6,000 to pay for an insurance policy which covers the period June 1, 2014 through May 31, 2015. An asset was debited.
______ 2.	At December 31, 2014, the company reviews tenants' records and notes that rent of $3,000 has been earned but not received.
______ 3.	The company has some revenue that has been received but has not been earned as of December 31, 2014.
______ 4.	Property taxes for the period July 1, 2014 through June 30, 2015 amount to $9,000 and are due by July 31, 2015.
______ 5.	$1,200 was received from a tenant on December 20, 2014, to cover the months of December 2014, January 2015, and February 2015.
______ 6.	At Jan. 1, 2014, office supplies on hand were valued at $220. During the year, purchases of office supplies amounted to $800. On Dec. 31, a count of supplies discloses $230 worth ...