The ledger of Hammond Company, on March 31, 2014, includes these selected accounts before adjusting entries are prepared.
|
Debit |
Credit |
|
|
Prepaid Insurance |
$3,600 |
|
|
Supplies |
2,800 |
|
|
Equipment |
25,000 |
|
|
Accumulated Depreciation—Equipment |
$5,000 |
|
|
Unearned Service Revenue |
9,200 |
An analysis of the accounts shows the following.
1. Insurance expires at the rate of $100 per month.
2. Supplies on hand total $800.
3. The equipment depreciates $200 a month.
4. During March, services were performed for one-half of the unearned service revenue.
Prepare the adjusting entries for the month of March.
Accrual accounting is often considered superior to cash accounting. Why, then, were some people critical of China’s use of accrual accounting in this instance?