Perez Company Was Founded in 2012 and Engaged in the Following

question 21

Essay

Perez Company was founded in 2012 and engaged in the following transactions:
1.issued common stock for cash
2.purchased supplies on account
3.collected cash from a customer for services to be provided over a period of 1 year
4.paid a cash dividend to stockholders
5.purchased a 2-year fire insurance policy
6.provided services to customers on account
7.collected cash from accounts receivable
8.paid cash for various operating expenses
9.paid rent in advance for 3 months at a time
Required:
a)For which of these transactions would adjusting entries be required at the end of the year?
b)Explain the reason why adjusting entries are required before financial statements can be prepared.

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Definitions:

Demand Schedule

A table or graph showing the quantity of a good that consumers are willing to purchase at various prices.

Supply Schedule

A table or graph that shows the quantity of goods that producers are willing and able to supply at various prices over a specified period.

Equilibrium Price

The market price at which the quantity of a good supplied is equal to the quantity demanded.

Equilibrium Quantity

The measure of goods or services being supplied and demanded at a price point where equilibrium occurs.