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)
Rent Revenue ( +R, +SE)
4,800
4,800
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)
Wages Payable (+L)
14,300
14,300
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
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)
Interest Payable (+L)
600
600
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)
Prepaid Insurance (-A)
1,000
1,000
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
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)
Fee Revenue (+R, +SE)
400
400
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)
Property Tax Payable (+L)
400
400
THE END!
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