Accounting Exercise 3.1 (Accounting for Deferrals)
The following transactions pertain to a recently started (in 20X8) Murphy Consulting company:
1) Business started when Mr. Murphy contributed $6,000 cash;
2) Services were provided for $2,300 cash;
3) Services on account were provided in amount of $3,500;
4) $2,000 cash was collected against the account receivable created in
Event No. 3;
5) On September 1, 20X8, $4,800 cash was received in advance for services
to be provided within a year;
6) $1,000 cash was paid for operating expense;
7) Operating expenses were incurred on account, $1,400;
8) $1,200 cash was paid on account payable created in Event No.7;
9) On September 1, 20X5 $3,600 cash was paid in advance for one-year office
rent.
Adjusting entries:
10) Services as in part from September to December were conducted as provided
in the contract and revenue for four months was recognized;
11) Rent expense for four months was recognized.
Required:
Show the effects of the transactions on the horizontal accounting equation like the one below:
| No |
Assets |
= |
Liabilities |
+ |
Equity |
Rev. |
- |
Exp. |
= |
Net Inc. |
Cash Flows |
|||||||||
| Cash |
+ |
Acc. |
+ |
Prp. |
= |
Acc. |
+ |
Un. |
+ |
Cont. |
+ |
Ret. |
||||||||
| 1 |
6,000 |
+ |
n/a |
+ |
n/a |
= |
n/a |
+ |
n/a |
+ |
6,000 |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
6,000 |
FA |
Location