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  • Steff Any

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    ROSE MARIE HERMOSA
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    The document outlines the accounting treatment of various prepaid expenses and unearned revenues under both the asset and expense methods. It provides journal entries, calculations, and examples for prepaid rent, insurance, supplies, and unearned rental revenue. The different methods are compared for recognizing revenues and expenses as well as reporting prepaid amounts as assets over time.

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    The document outlines the accounting treatment of various prepaid expenses and unearned revenues under both the asset and expense methods. It provides journal entries, calculations, and examples for prepaid rent, insurance, supplies, and unearned rental revenue. The different methods are compared for recognizing revenues and expenses as well as reporting prepaid amounts as assets over time.

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    8 views13 pages

    Steff Any

    Uploaded by

    ROSE MARIE HERMOSA
    The document outlines the accounting treatment of various prepaid expenses and unearned revenues under both the asset and expense methods. It provides journal entries, calculations, and examples for prepaid rent, insurance, supplies, and unearned rental revenue. The different methods are compared for recognizing revenues and expenses as well as reporting prepaid amounts as assets over time.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 13

    IX.

    Under Asset Method

    a.
    DATE PARTICULARS P/R
    1 2020
    2 Aug. 1 Prepaid Rent Expense
    3 Cash
    4 To record advance payment of rent
    5

    b.
    Advance Payment 120,000
    Divided by: Months covered 12
    Monthly Rental Expiration 10,000

    c.
    Beginning Month August 1, 2020
    Reporting End Month December 31, 2020
    Expense Portion of Rent as of 12/31/2020 in months 5 months

    d.
    Monthly Rental Expiration 10,000
    Multiply by: Expense Portion of Rent as of 12/31/2020 5
    Expense Amount at the end of accounting period 50,000

    e
    Prepaid Rent Expense, 8/1/2020 120,000
    Less: Expense Portion 50,000
    Prepaid Rent Expense, 12/31/2020 (Asset) 70,000

    f
    DATE PARTICULARS P/R
    1 2020
    2 Dec. 31 Rent Expense
    3 Prepaid Rent Expense
    4 To record expired portion of prepaid rent
    5
    DR CR
    1
    120,000 2
    120,000 3
    4
    5

    120,000
    12
    10,000

    August 1, 2020
    December 31, 2020
    5 months

    10,000
    5
    50,000

    120,000
    50,000
    70,000

    DR CR
    1
    50,000 2
    50,000 3
    4
    5
    X. Under Expense Method

    a.
    DATE PARTICULARS P/R
    1 2020
    2 Oct. 1 Insurance Expense
    3 Cash
    4 To record advance payment of insurance
    5

    b.
    Advance Payment 24,000
    Divided by: Months covered 12
    Monthly Insurance Expiration 2,000

    c.
    Beginning Month October 1, 2020
    Reporting End Month December 31, 2020
    Expense Portion of Insurance as of 12/31/2020 in months 3 months

    d.
    Monthly Insurance Expiration 2,000
    Multiply by: Expense Portion of Insurance as of 12/31/2020 3
    Expense Amount at the end of accounting period 6,000

    e
    Insurance Expense, 10/1/2020 24,000
    Less: Expired Portion 6,000
    Prepaid Insurance, 12/31/2020 (Asset) 18,000

    f
    DATE PARTICULARS P/R
    1 2020
    2 Dec. 31 Prepiad Insurance
    3 Insurance Expense
    4 To record unexpired portion of insurance
    5
    DR CR
    1
    24,000 2
    24,000 3
    4
    5

    24,000
    12
    2,000

    October 1, 2020
    December 31, 2020
    3 months

    2,000
    3
    6,000

    24,000
    6,000
    18,000

    DR CR
    1
    18,000 2
    18,000 3
    4
    5
    XI.

    1 Asset Method

    DATE PARTICULARS P/R


    1 2020
    2 Jan. 3 Office Supplies
    3 Cash
    4 To record purchase of office supplies
    5

    Expense Method

    DATE PARTICULARS P/R


    1 2020
    2 Jan. 3 Office Supplies Expense
    3 Cash
    4 To record purchase of office of supplies
    5

    2 Asset Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Office Supplies Expense
    3 Office Supplies
    4 To record used supplies
    5

    Expense Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Office Supplies (35,000 - 30,000)
    3 Office Supplies Expense
    4 To record unused supplies
    5

    3 Asset Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Office Supplies Expense (35,000 - 30,000)
    3 Office Supplies
    4 To record used supplies
    5

    Expense Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Office Supplies
    3 Office Supplies Expense
    4 To record unused supplies
    5

    4 Liability Method

    DATE PARTICULARS P/R


    1 2020
    2 Sept. 1 Cash
    3 Unearned Rental Revenue
    4 To record advanced collection of rent
    5

    Revenue Method

    DATE PARTICULARS P/R


    1 2020
    2 Sept. 1 Cash
    3 Rental Revenue
    4 To record advanced collection of rent
    5

    Liability Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Unearned Rental Revenue (120,000/12)*4
    3 Rental Revenue
    4 To record earned rental revenue
    5
    Revenue Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Rental Revenue (120,000/12)*8
    3 Unearned Rental Revenue
    4 To record unearned rental revenue
    5
    DR CR
    1
    35,000 2
    35,000 3
    4
    5

    DR CR
    1
    35,000 2
    35,000 3
    4
    5

    DR CR
    1
    30,000 2
    30,000 3
    4
    5

    DR CR
    1
    5,000 2
    5,000 3
    4
    5

    DR CR
    1
    32,000 2
    32,000 3
    4
    5

    DR CR
    1
    3,000 2
    3,000 3
    4
    5

    DR CR
    1
    120,000 2
    120,000 3
    4
    5

    DR CR
    1
    120,000 2
    120,000 3
    4
    5

    DR CR
    1
    40,000 2
    40,000 3
    4
    5
    DR CR
    1
    80,000 2
    80,000 3
    4
    5
    VII. Revenue Method

    DATE PARTICULARS P/R


    1 2020
    2 Dec. 31 Rent Income (60,000/12)*10
    3 Unearned Rent Income
    4 To record unearned rent income
    5
    DR CR
    1
    50,000 2
    50,000 3
    4
    5
    A Cash Basis of Accounting
    Insurance Expense
    2020 18,000
    2021 0
    2022 0
    2023 0

    B Accrual Basis of Accounting


    Insurance Expense
    2020 (18000/36)*4 2,000
    2021 (18000/36)*12 6,000
    2022 (18000/36)*12 6,000
    2023 (18000/36)*8 4,000

    C. Cash Basis of Accounting


    Insurance Premium as an Asset
    12/31/2020 0
    12/31/2021 0
    12/31/2022 0
    12/31/2023 0

    D. Accrual Basis of Accounting


    Insurance Premium as an Asset 36
    12/31/2020 (18000/36)*(36-4) 16,000
    12/31/2021 (18000/36)*(36-16) 10,000
    12/31/2022 (18000/36)*(36-28) 4,000
    12/31/2023 (18000/36)*(36-36) 0

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