Which of the following is not an adjusting entry?

Which of the following is NOT an adjusting entry? I. a. Prepaid rent Rent expense b. Cash Uneamed revenue Interest expense In


Answer to Question 1.

Correct Option: Option b

Adjusting entries are those entries which are made at period end to recognise Revenue and Expenses which has been accrued but not received / paid.

The Option b entry record receipt of cash against a liabilities and doesn’t record any revenue / expense incurred.

The Option a record Rent Expense, Option c record Interest Expense accrued and Option d is to record Salaries Expense incurred.

Answer to Question 2.

Correct Option: Option c

Working Capital is excess of Current Assets over Current Liabilities.

Working Capital = Current Assets - Current Liabilities

Prepaid Expense is a Current Assets, Unearned Revenue is a Current Liability, whereas Allowance for Uncollectible accounts reduces Accounts Receivable which is a current Assets.

Answer to Question 3.

Correct Option: Option d

Prepaid Insurance, 2013 = Prepaid Insurance, 2012 + Insurance paid – Insurance Expense
$42,000 = $48,400 + $86,000 – Insurance Expense
Insurance Expense = $92,400

Answer to Question 4.

Correct Option: Option c

The ending Retained Earnings are calculated by adding Income earned and deducting Dividend declared during the year to Beginning Retained Earnings.

Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividend

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