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Problem 4-2

Problem 4-2. Group 1: Luke Alex Nairi Anida Southyda. a. On September 1,2007, Burress collected six months’ rent of $7,200 on storage space. At that date, Burress debited Cash and credited Unearned Rent Revenue for $7,200. Deferred Revenue Unearned rent revenue (-L) 4,800

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Problem 4-2

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  1. Problem 4-2 Group 1: Luke Alex Nairi Anida Southyda

  2. a. On September 1,2007, Burress collected six months’ rent of $7,200 on storage space. At that date, Burress debited Cash and credited Unearned Rent Revenue for $7,200. Deferred Revenue • Unearned rent revenue (-L) 4,800 Rent Revenue ( +R, +SE) 4,800

  3. b. At December 31, 2007, wages earned by employees totaled $14, 300. The employees will be paid on the next payroll date, January 15, 2008. Accrued Expense • Wages Expense (+E, -SE) 14,300 Wages Payable (+L) 14,300

  4. c. The company earned service revenue of $2,000 on a special job that was completed December 29, 2007. Collection will be made during January 2008. No entry has been recorded Accrued Revenue • Accounts Receivable (+A) 2,000 Service Revenue (+R, +SE) 2,000

  5. d. On October 1, 2007, the company borrowed $20,000 from a local bank and signed a 12 percent note for that account. The principal and interest are payable on the maturity date, September 30, 2008. Accrued Expense • Interest Expense (+E, -SE) 600 Interest Payable (+L) 600

  6. e. On November 1, 2007, Burress paid a one-year premium for property insurance, $6,000, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount. Deferred Expense • Insurance Expense (+E, -SE) 1,000 Prepaid Insurance (-A) 1,000

  7. f. Depreciation of $1,500 must be recognized on a service truck purchased on July 1, 2007, at a cost of $12,000. Deferred Expense • Depreciation Expense (+E, -SE) 1,500 Accumulated Depreciation (+XA, -A) 1,500

  8. g. Cash of $2,400 was collected on November 1, 2007, for services to be rendered evenly over the next year beginning on November 1. Unearned Service Revenue was credited when the cash was received. Deferred Revenue • Unearned Fee Revenue (-L) 400 Fee Revenue (+R, +SE) 400

  9. h. On December 31, 2007, the company estimated it owed $400 for 2007 property taxes on land. The tax will be paid when the bill is received in January 2008. Accrued Expense • Property Tax Expense (+E, -SE) 400 Property Tax Payable (+L) 400

  10. THE END! We Heart Accounting

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