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 Subject: Accounts Year-End Analysis Category: Business and Money > Accounting Asked by: ydorb-ga List Price: \$15.00 Posted: 28 Jun 2006 12:51 PDT Expires: 28 Jul 2006 12:51 PDT Question ID: 741815
 ```Year-End Analysis of Accounts An analysis of cash records and account balances of Bennett, Inc., for 2006 is as follows: Account Account Cash Balances Balances Received or Jan. 1, 2006 Dec. 31, 2006 Paid in 2006 Wages Payable . . . . . . . . . . . . . . . . . \$2,600 \$3,000 Unearned Rent . . . . . . . . . . . . . . . . . 4,500 5,000 Prepaid Insurance . . . . . . . . . . . . . . . 100 120 Paid for wages . . . . . . . . . . . . . . . . . \$29,600 Received for rent . . . . . . . . . . . . . . . 12,000 Paid for insurance . . . . . . . . . . . . . . 720 Required: Determine the amounts that should be included on the 2006 income statement for (1) wages expense, (2) rent revenue, and (3) insurance expense.```
 ```Hi there, The key to this problem is what is called the Matching Princple. Matching Principle states two things: 1. Revenues are recorded when earned. 2. Expenses are recorded when incurred. Having said that, let's get into the question. (1) Wages. The wages payable increased from \$2,600 to \$3,000. Thus, aside from what Bennett paid that year, they incurred \$400 more in wage expense during 2006. Therefore, the amount that should be included in the income statement is: \$29,600 + \$400 = \$30,000 (2) Rent revenue Bennett received \$12,000 for rent but their unearned rent account increased by \$500. So, the actual rent revenue -earned- during 2006 is 500 less than what they were paid for. Thus, the amount that should be included in the income statement is: \$11,500. (3) Insurance expense Bennett paid \$720 for insurance but the prepaid insurance account increased by \$20 so they paid \$20 more than the amount of expense that they incurred. Thus, the amount that should be included in the income statement is \$720 - \$20 = \$700. I hope this has helped and please feel free to ask for any clarification. Cheers, Tox-ga```
 ydorb-ga rated this answer: `Thanks! This really helps me understand what I am trying to do!`