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1. (8 Points) one example of each. Define the terms accrual and deferral in refe

ID: 2340659 • Letter: 1

Question

1. (8 Points) one example of each. Define the terms accrual and deferral in reference to adjusting journal entries. Give 2. (12 Points) Your examination of Engel Company's records provides the following information for the December 31, 2013, year-end adjustments. Required: Prepare the adjusting entries to record each transaction a. Bad debts are to be recorded at 2% of sales. Sales made on credit totaled $25,000 for the year. b. Salaries at year-end that have accumulated but have not been paid total $1,400. c. Annual straight-line depreciation for the company's equipment is based on a cost of $30,000, an estimated life of 8 years, and an estimated residual value of $2,000. d. Prepaid insurance in the amount of $800 has expired.

Explanation / Answer

I am solving first 2 questions since as per policy we have to solve only one

1)Accrual means recognizing revenue or expense before a payment or receipt and Deferral means delay in the recognizing revenue or expense.

Example of accrual expense we have to pay salaries of august in September so in august it is a liability and when payment made the liability is removed

Salaries expense(db)100

Salaries payable(db)100

Adjusting entry:

Cash(db) 100

Salaries payable(cr)100

Deferal revenue means cash received in advance for a work which will be done later

Cash(db)100

Unearned revenue(cr) 100

Adjusting entry:

Unearned revenue(db)100

Service revenue(Cr)100

2)

a)bad debt expense(db) 2%*25000=500

account receivable(Cr) 500

b) salaries payable(db)1400

cash(cr)1400

c)depreciation=(cost-salvage)/years=(30000-2000)/8=3500

depreciation expense(db) 3500

accumulated depreciation(cr)3500

d) insurance expense(db)800

prepaid insurance(cr)800