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Assignment on Accounting EMBA

   

Added on  2021-04-21

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Hult International Business School - London– Individual Post Course AssignmentCourse:Accounting EMBA 2017 / 2018Lecturer: Alek GrzeszczakDate: February 2018Total Points: 160Name:Part 1 – SHORT QUESTIONS (74 points)1-What is a deferred expense (give example) and how is it recorded/classified at the time cash changes hands. What are the bookings (if any) afterwards ? (3 points)At the end of the accounting period, adjustments need to be made to several trial balance accounts. Hence,:Deferred means .... Delayed until later and A deferred Expense is defined as an asset, created when and expense is paid but not yet incurred Recording (“expansible”) Items as assets means ..delaying( deferring) the recording of an expense until later.-Since the economic benefits (from these assets) will expire-Such assets accounts will have to be reduced causing and expense to be recorded. First Later Deferred Expense Cash Paid Expense Recognized 1

Deferred Expense under rules of accrual accounting:• Property, Equipment, Supplies are all recorded as assets (as they are resources that will benefit the business going forward). These assets will get used up at some point, the benefit will cease to exist. Consequently, these assets will become a business expense. •This leads to a deferred expense adjusting entryExample (1)A-Halfway through the year WW takes out a business insurance coverage and (pre)pays $1,000 cash for it. That will cover WW for the next twelve months. Prepaid Insurance = Cash Debit Credit Debit Credit + - + - 1,000 0 0 1,000 2

B-By the end of the year, half the insurance policy wouldhave expired. An adjusting entry for $500 must be made in order to adjust the asset account.• Insurance Expense (not originally on the trial balance), will now appear there. Insurance Expense = Prepaid Insurance Debit Credit Debit Credit + - + - 500 0 0500 Example (2)A-The Office Supplies account on the trial balance indicates a balance of $2,000. B-Inventory taken at the end of the year indicates that the cost of the Office Supplies account still in possession is $1,500. • $500 worth of Office Supplies have therefore been used up and have become a period expense. Adjusting entry is required. Supplies Expense= Office Supplies Debit Credit Debit Credit + - + - 500 0 0500 Supplies Expense (not originally on the trial balance),will now appear on the trial balance 3

2.What is unearned revenue (give example) and how is it recorded/classified at the time cashchanges hands? What are the bookings (if any) afterwards ? (3 points)At the end of the accounting period, adjustments need to be made to several trial balance accounts. Hence,:Deferred means .... Delayed until later and Unearned revenue (Also known as differed income or deferred revenue) represents received advance payments or revenue that is not yet collected. We can also say it is the part of revenue which is received but not yet earned.Recording (“revenue able”) Items as liabilities means ..delaying( deferring) the recording of an expense until later. -Since the economic benefits (from these liabilities) will arise -Such liabilities accounts will have to be reduced causing and expense to be recorded. First Later Deferred Revenue Cash Received Revenue Recognized Deferred Revenue under rules of accrual accounting:-Revenue can only be recorded when it has been earned, i.e. service has been performed. -Cash received as a prepayment gives rise to a liability (Unearned Revenue). -As work is later completed Revenue is (progressively) recognized and theliability account is (progressively) eliminated. • This leads to a deferred revenue adjusting entry. 4

Example :A-On October 1st WW receives $1,200 advance payment from a customer for consulting work to be performed (equally)over the next twelve months.Cash = Unearned Revenue Debit Credit Debit Credit + - _ + 1,200 0 0 1,200 B-By the end of the year, one quarter of the Unearned Revenue would become earned. An adjusting entry for $300 must be made in order to adjust the liability account .Unearned Revenue = Revenue(s) Debit Credit Debit Credit - + _ + 300 0 0 300 •Revenues account will now increase .5

3.What is the sequence of a full accounting cycle ? List all steps. (4 points)Accounting cycle is the process of recording and processing the accounting events of a company. The series of steps begin when a transaction occurs and ends when the transaction is recorded in the financial statements. The Accounting Cycle is the process followed by entities to analyse and record transactions. Adjust the records at the end of theperiod . Prepare the financial statement and carry forward the balances for the next accounting period. During the Period 1.Analyze Transactions.2.Record Journal entries in the general journal 3.Post amounts to the general ledgerAt the End of the Period 4.Prepare Trial Balance 5.Adjust revenues and expenses ( record in journal and post to leger)6.Prepare financial Statements and books of accounts.7.Close revenues, expenses, gains, and losses to retained Earnings ( Record in journal and Post to ledger)6Start of New Period End of Period

4.On July 1, 2017, Johnson Company paid $2,400 for a four-year insurance policy with theinsurance coverage beginning on that date. As of December 31, 2017, what are the (related) account balances (list the accounts and amounts, Debits or Credits) after adjusting entries have been made?(3 points)Insurance Expense A/C Dr $300 To Prepaid insurance$300Prepaid Amount $ 2,400Period 4 years (48)months As prepaid amount get used up, the amount will be recorded as asset and adjusting entry is required to recognize the expense( Debit Insurance Expense) and reduce the used asset(credit prepaid expense)Balance = $2,400/48=$300 per month( Insurance expires at$300/month)1st July ,2017 to Dec 31st ,2017 =(6 months) current year x$50= $300 Insurance Expense 5.On October 1, 2017, Smith Company borrowed $200,000 on a one-year, 6% (annual rate) note payable. The principal and interest will be paid on September 30, 2018. As of December 31, 2017, what are the (related) account balances (list the accounts and amounts, Debits or Credits) after adjusting entries have been made?(3 points)Cash Debit$200,000 Note payable Credit $200,000Interest Expense Debit $3,000 Interest Payable Credit $3,000Noe payable =$200,000Interest on one year ,6% 7

Due September 30,2018 Adjusting Entry as of Oct 1st to December 31,2017 =($200,000 (6%)x(3/12)= $3,000Prepare the journal entry for September 30, 2018. (4 points)Debit and credit the accounts affected30/09/18Interest Expense Debit $9000 Interest Payable Credit $900030/09/18Interest Payable Debit$12000 Cash Credit$120008

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