Image Transcription for Educational Purposes: --- ### Depreciation Expense | Date | Particulars | Debit | Credit | |------------|-------------------------|-------|--------| | | Depreciation Expense | $750 | | | | Accumulated Depreciation| | $750 | | Total | | $750 | $750 | --- 7. Journal Entry for May: - On May 16, an architect was given $1,500 to draft house plans. The plans will be drawn up at some time in July. Prepare the appropriate journal entry for May. | Date | Particulars | Debit | Credit | |------------|-------------------------|--------|--------| | March 16 | Prepaid Architect Fees | $1,500 | | | | Cash | | $1,500 | | Total | | $1,500 | $1,500 | 8. Assumption for July: Assume the facts in problem 7. In July, the architect drew up the plans and delivered them to the client. Prepare the appropriate adjusting journal entry for July. 9. Financial Planner Scenario: You are a financial planner. In July, you drafted a financial plan for $2,800 and delivered it to the client. Since you know the client well and she has good credit, you will accept full payment in August. Prepare the appropriate entry for July. ---

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

**Image Transcription for Educational Purposes:**

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### Depreciation Expense
| Date | Particulars | Debit | Credit |
|------------|-------------------------|-------|--------|
| | Depreciation Expense | $750 | |
| | Accumulated Depreciation| | $750 |
| **Total** | | $750 | $750 |

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7. **Journal Entry for May:**

- On May 16, an architect was given $1,500 to draft house plans. The plans will be drawn up at some time in July. Prepare the appropriate journal entry for May.

| Date | Particulars | Debit | Credit |
|------------|-------------------------|--------|--------|
| March 16 | Prepaid Architect Fees | $1,500 | |
| | Cash | | $1,500 |
| **Total** | | $1,500 | $1,500 |

8. **Assumption for July:**

Assume the facts in problem 7. In July, the architect drew up the plans and delivered them to the client. Prepare the appropriate adjusting journal entry for July.

9. **Financial Planner Scenario:**

You are a financial planner. In July, you drafted a financial plan for $2,800 and delivered it to the client. Since you know the client well and she has good credit, you will accept full payment in August. Prepare the appropriate entry for July.

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Expert Solution

Step 1

INTRODUCTION

Adjusting entries are those entries which are prepared are at the end of accounting period to match expenses with the revenues. Expenses incurred relating to the revenue of current account year must be recorded in current year only. It is in compliance with accrual concept.

Prepaid expenses are those expenses which are paid by the company before due date. So it doesn’t become as expenses since those are not related to current period. When it becomes due, then only expenses are recorded. Here it is current asset because payment is made before due date. Prepaid rent becomes rent expenses after due date.

When services are rendered to customers, customers may or may not make payment on receiving services. In such cases service is recorded as service revenue due to accrual concept. Here service revenue is earned but not realized in cash and customers are liable to make payment. So record is made for service revenue and amount receivable from customers.

Next step shows adjustment entries on various situations as follows: