Pierce Company Was Founded in Year 1 and Engaged in the Following

question 45

Essay

Pierce Company was founded in Year 1 and engaged in the following transactions:Issued common stock for cashPaid rent in advance for three months at a timePurchased supplies on accountCollected cash from a customer for services to be provided over a period of one yearPaid a cash dividend to stockholdersPurchased a two-year fire insurance policyProvided services to customers on accountCollected cash from customers in partial settlement of accounts receivablePaid cash for various operating expensesRequired:a)Identify the transactions from the list above that will require adjusting entries at year end.b)Explain why adjusting entries are required before financial statements can be prepared.

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Definitions:

Expected Utility

A theory in economics that calculates the utility of an outcome based on its probability and the utility of the outcomes.

Income

The monetary payment received for goods or services, or profit from investments, typically calculated on a regular basis like annually or monthly.

Expected Utility Function

A mathematical expression that represents an individual's preferences over a set of outcomes, incorporating the probabilities of those outcomes.

Sure Payment

A guaranteed payment or financial transaction that is certain to occur.