Adjustments and Accrual and Cash Basis - 91225

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QS 3-1 Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR), accrued expenses (AE), or accrued revenues (AR). a. UR - To record revenue earned that was previously received as cash in advance. b. PE - To record annual depreciation expense. c. AE - To record wages expense incurred but not yet paid (nor recorded). d. AR - To
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QS  3-9


In its first year of operations, Harden Co. earned $39,000 in revenues and received $33,000 cash from these customers. The company incurred expenses of $22,500 but had not paid $2,250 of them at yearend. Harden also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate the first year’s net income under both the cash basis and the accrual basis of accounting.

Accrual Basis