Chpt 8 Week 7 Adjustments

When we adjust for income and expense accounts, we do so according to the _________ Concept

Which of the following characteristics does not apply to Income Receivable?

• It is an asset

• Its contra-account will be credited

• It will be credited

• Its contra-account will be debited

• It is a liability

Income Received In Advance will be __________ because it is a/an _________ and therefore its contra-account will be _________.

• Credited; Liability; Debited

• Debited; Asset; Credited

• Debited; Expense; Credited

• Credited; Income; Debited

Information: Holt Ltd has a financial year of 1 January 2019 - 31 December 2019. The entity has received rent income from their tenant for the period 1 Jan 2019 - 31 March 2020.

Question: Which of the following account(s) will be affected by the above information?

• Income Receivable

• Income Received in Advance

• Expenses Payable

• Expenses Prepaid

Information: Roses Ltd paid a total of R26000 for this year's insurance. It is known that the monthly insurance premiums are R2000.

Choose the correct journal entry for the adjustment

• DR: Prepaid expenses 2000

  CR: Insurance 2000

• DR: Insurance 2000

  CR: Expenses Payable 2000

• DR: Prepaid epenses 2167

  CR: Insurance 2167

• DR: Insurance 2167

  CR: Expenses Payable 2167

A loan from FBN Bank was obtained on 31 December 2018. The loan is repayable in three equal annual loan instalments on the anniversary (i.e. after a year) of the loan. Interest of 12% per annum is also payable annually on the anniversary of the loan. Soaps and Suds has never defaulted on any loan or interest repayments to date.

Pre-adj TB amounts for the year ended 28 Feb 2020:

> Loan R200 000

>Interest expense on loan R30 000

The correct adjusting journal entry is:

• Dr Interest Expense R34000

  Cr Expenses payable R34000

• Dr Prepaid Expense R6000

  Cr Interest expense R6000

• Dr Interest expense R6000

  Cr Expenses payable R6000

• Dr Interest expense R4000

  Cr Expenses payable R4000

• Dr Interest expense R36000

  Cr Expenses payable R36000

Information: Rainbow Traders has a 31 Dec 2019 year end. They leased additional warehouse space to Sunshine Ltd for the whole financial year. The rental for December is still outstanding. Rentals increased by 10% on 1 Oct 2019. In the pre-adjustment trial balance of Rainbow Ltd rent income of R72800 is shown. Rainbow Traders have no other rent income.

Question: What is the correct journal entry?

• DR: Income Receivable 6500

  CR: Rent Income 6500

• DR: Income received in advance 6 500

  CR: Rent income 6 500

• DR: Income Receivable 7150

  CR: Rent Income 7150

• DR: Income receivable other amount

  CR: Rent Income other amount