We have learned about four types of adjustments: (1) prepaid expenses, (2) unearned revenues, (3) accrued revenues, and (4) accrued expenses. With those concepts in mind, review the following scenario, As the book-keeper for your company you are required to create quarterly financial statements (Income Statement, Statement of Owner's Equity Balance Sheet and Statement of Cash Flows) in order to report on the financial activities of the company for the quarter (three months). It is now March 29th, and in preparation for creating the 1st quarter's financial statements (as of 3/31), you have called a meeting with the Dept. Managers for Accounts Receivable and Accounts Payable to confirm deadlines that have to be met for recording March-related transactions. As the meeting starts the owner walks in - she sits quietly as you explain the deadlines, but as soon as you have finished she says "Well, for this quarter, if we have not paid March invoices by March 31, there is no need to record them in March. We can record/expense those invoices when we pay them in April or May." Required: 1. Do you agree with the owner, or, do you feel that an adjusting entry is necessary in the situation described? If so - which type of adjusting entry is needed?
2. Why is the adjustment necessary? (Refer to concepts in the chapter) In your post:
a) discuss the impact (understated or overstated) on the accounts affected if the adjustment is not made, and
b) explain how the adjustment affects the appropriate financial statements
3, Assume one of the unpaid invoices is for $2,000 in Advertising. Show the type of adjusting entry you would create.

1. Do you agree with the owner, or, do you feel that an adjusting entry is necessary in the situation described? If so - which type of adjusting entry is needed?

2. Why is the adjustment necessary? (Refer to concepts in the chapter) In your post:

a) discuss the impact (understated or overstated) on the accounts affected if the adjustment is not made, and

b) explain how the adjustment affects the appropriate financial statements

3, Assume one of the unpaid invoices is for $2,000 in Advertising. Show the type of adjusting entry you would create.

Dr Advertising expense 2,000

    Cr Accounts payable 2,000

Explanation:

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.