Adjusting entries : Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability). Prepaid expenses: The prepaid expenses are those expenses which are paid in advance, before they are incurred. These are treated as asset for the business. To determine: The rights acquired at November 1 represents an asset or an expense.

Question

The December 31, 2021, balance sheet of Chen, Incorporated, showed long-term debt of $1,420,000, $144,000 in the common stock account, and $2,690,000 in the additional paid-in surplus account. The December 31, 2022, balance sheet showed long-term debt of $1,620,000, $154,000 in the common stock account and $2,990,000 in the additional paid-in surplus account. The 2022 income statement showed an interest expense of $96,000 and the company paid out $149,000 in cash dividends during 2022. The firm’s net capital spending for 2022 was $1,000,000, and the firm reduced its net working capital investment by $129,000. What was the firm's 2022 operating cash flow, or OCF?

Answer 1

Question

Chapter 3, Problem 9DQ

A.

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Prepaid expenses:

The prepaid expenses are those expenses which are paid in advance, before they are incurred. These are treated as asset for the business.

To determine: The rights acquired at November 1 represents an asset or an expense.

B.

To determine

To justify: The reason for debiting the rent expense at the time of payment.

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