BRIDGE TO THE PROFESSION
Professional Research
Recording transactions in the accounting system requires knowledge of the important characteristics of the elements of financial statements, such as assets and liabilities. In addition, accountants must understand the inherent uncertainty in accounting measures and distinctions between related accounting concepts that are important in evaluating the effects of transactions on the financial statements.
Instructions
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(a) The three essential characteristics of assets.
(b) The three essential characteristics of liabilities.
(c) Uncertainty and its effect on financial statements.
(d) The difference between realization and recognition.
Professional Simulation
In this simulation, you are asked to address questions regarding the accounting information system. Prepare responses to all parts.
Nalezny Advertising Agency was founded by Casey Hayward in January 2009. Presented below are both the adjusted and unadjusted trial balances as of December 31, 2012.
|
Nalezny Advertising Agency |
||||
|
Unadjusted |
Adjusted |
|||
|
Dr. |
Cr. |
Dr. |
Cr. |
|
|
Cash |
$11,000 |
$11,000 |
||
|
Accounts Receivable |
20,000 |
21,500 |
||
|
Supplies |
8,400 |
5,000 |
||
|
Equipment |
60,000 |
60,000 |
||
|
Accumulated Depreciation—Equipment |
$28,000 |
$35,000 |
||
|
Accounts Payable |
5,000 |
5,000 |
||
|
Unearned Service Revenue |
7,000 |
5,600 |
||
|
Salaries and Wages Payable |
–0– |
1,300 |
||
|
Common Stock |
10,000 |
10,000 |
||
|
Retained Earnings |
4,800 |
4,800 |
||
|
Service Revenue |
58,600 |
61,500 |
||
|
Salaries and Wages Expense |
10,000 |
$123,200 |
||
|
Depreciation Expense |
11,300 |
|||
|
Supplies Expense |
7,000 |
|||
|
Rent Expense |
$113,400 |
3,400 |
||
|
4,000 |
$113,400 |
4,000 |
$123,200 |
|
Journalize the annual adjusting entries that were made. (Omit explanations.)
Prepare an income statement for the year ending December 31, 2012, and an unclassified balance sheet at December 31.
Describe the remaining steps in the accounting cycle to be completed by Nalezny for 2012.