Deferred and Accrued Revenues

Questions
Q6.1. Define deferred revenue. Give two examples of deferred revenue.
Q6.2. Define accrued revenue. Give two examples of accrued revenue.
Q6.3. Why is deferred revenue reported in a balance sheet as a liability?
Q6.4. Why is accrued revenue reported in a balance sheet as an asset?
Q6.5. Fodder Hospital received a year’s rent in advance on May 1, 20X1.
The hospital’s December 31, 20X1, balance sheet reported deferred
rental income of $580. What was the amount of rent received on
May 1, 20X1?
Q6.6. Ferntown Hospital received $1,800, representing a year’s rent in
advance, on November 1, 20X1. In the transaction entry, $1,800
was credited to the deferred rental income account. Assuming that
adjustments are made annually on December 31 only, what adjusting
entry should be made on December 31, 20X1?
Q6.7. Refer to the data of Question 6.6 but assume that the rental income
account was credited for $1,800 in the transaction entry. Assuming
that adjustments are made annually on December 31 only, what
adjusting entry should be made on December 31, 20X1?
Exercises
E6.1. Foster Hospital’s 20X2 statement of operations reported rental
income of $8,200. The hospital’s balance sheets reported deferred
rental income as follows:
12/31/X1 $1,700
12/31/X2 1,300
Required: What was the amount of rent actually received in cash
during 20X1?
E6.2. Fat Hospital received in cash rental payments of $10,700 during
20X2. Its balance sheets reported deferred rental income as follows:
12/31/X2 $2,600
12/31/X1 1,80

Required: What amount should be reported as rental income in Fat
Hospital’s 20X2 statement of operations?
E6.3. On September 1, 20X1, Fasby Hospital received $10,620 of fees
and tuition for one of its educational programs that has a ninemonthschool year ending May 31, 20X2.
Required: What amount should be reported as deferred tuition
income in the hospital’s December 31, 20X1, balance sheet?
E6.4. Favor Hospital invested $60,000 in 8 percent government bonds
on August 1, 20X1. These bonds, which were purchased at face
value, pay interest annually on August 1, commencing August 1,
20X2.
Required: Assuming that adjustments are made annually on
December 31 only, prepare the necessary adjusting entry for accrued
interest as of December 31, 20X1.
E6.5. Flabby Hospital received interest payments of $8,600 during 20X2.
Its balance sheets reported accrued interest receivable as follows:
12/31/X1 $1,100
12/31/X2 1,400
Required: What amount should be reported as interest income in
the hospital’s 20X2 statement of operations?
Problems
P6.1. Frangipani Hospital’s December 31, 20X1, preadjusted trial balance
includes the following accounts, among others:
Acct.
No.
102 Temporary investments $24,000
103 Accrued interest receivable -0-
205 Deferred rental income 5,400
206 Deferred tuition income 4,320
403 Interest income -0-
404 Rental income -0-
405 Tuition income -0-
The following additional information is available:
1. On September 1, 20X1, the hospital invested $24,000 (face

value) in 8 percent government bonds that pay interest annually
on September 1, commencing September 1, 20X2.
2. On June 1, 20X1, the hospital received a year’s rent in advance.
3. On September 1, 20X1, the hospital received nine months’
tuition in advance for one of its educational programs.
Required: Prepare, in general journal form, the necessary adjusting
entries at December 31, 20X1.
P6.2. Frosty Hospital’s December 31, 20X1, preadjusted trial balance
includes the following accounts, among others:
Acct.
No.
102 Temporary investments $30,000
103 Accrued interest receivable -0-
205 Deferred rental income -0-
206 Deferred tuition income -0-
403 Interest income -0-
404 Rental income 5,400
405 Tuition income 4,320
The following additional information is available:
1. On April 1, 20X1, the hospital invested $30,000 (face value) in
8 percent government bonds that pay interest annually on April
1, commencing April 1, 20X2.
2. On June 1, 20X1, the hospital received a year’s rent in advance.
3. On September 1, 20X1, the hospital received nine months’
tuition in advance for one of its educational programs.
Required: Prepare, in general journal form, the necessary adjusting
entries at December 31, 20X2.
P6.3. The following is Flapper Hospital’s preadjusted trial balance as of
December 31, 20X1:
Acct.
No.
101 Cash $ 34,900
102 Temporary investments 60,000
103 Accrued interest receivable -0-
104 Accounts receivable 172,000
106 Inventory 15,000
107 Prepaid insurance 6,480
108 Prepaid rent 4,500
109 Prepaid interest 2,400

120/130/140 Land, Buildings,
and Equipment 350,020
201 Accounts payable $ 28,200
202 Notes payable 48,000
203 Accrued interest payable -0-
204 Accrued salaries and wages payable -0-
205 Deferred rental income 3,600
206 Deferred tuition income 4,900
250 Bonds payable 200,000
301 Hospital net assets 335,300
302 Revenue and expense summary -0-
401 Routine services revenue 97,500
402 Ancillary services revenue 58,200
403 Interest income -0-
404 Rental income -0-
405 Tuition income -0-
406 Other operating revenues 19,300
601 Salaries and wages expense 100,000
602 Supplies expense 25,000
603 Utilities expense 12,000
604 Insurance expense -0-
605 Repairs expense 9,000
606 Rent expense -0-
608 Interest expense -0-
610 Other expenses 3,700
$795,000 $795,000
The following additional information is available:
1. On August 1, 20X1, the hospital invested $60,000 (face value)
in 8 percent government bonds that pay interest annually on
August 1, commencing August 1, 20X2.
2. On January 1, 20X1, a three-year insurance premium was paid
in advance.
3. One year’s rent was received in advance on March 1, 20X1.
4. One year’s rent was paid in advance by the hospital on May 1,
20X1.
5. On November 1, 20X1, the hospital issued its six-month, 10
percent note for $48,000 to a local bank in connection with a
short-term loan. The interest was prepaid by the hospital.
6. On October 1, 20X1, the hospital issued $200,000 of 6 percent,
ten-year bonds at face value. These bonds pay interest semiannually on October 1 and April 1, commencing April 1, 20X2.
7. Unpaid salaries and wages at December 31, 20X1, amounted to
$16,800.

8. On September 1, 20X1, the hospital received nine months’
tuition in advance for one of its educational programs.
Required: (1) Enter the preadjusted December 31, 20X1, balances in
general ledger accounts. (2) Prepare, in general journal form, the
necessary adjusting entries at December 31, 20X1. (3) Post the
adjusting entries to the ledger accounts and prepare an adjusted trial
balance at December 31, 20X1. (4) Prepare a statement of operations
for 20X1 and a balance sheet at December 31, 20X1. (5) Prepare, in
general journal form, the necessary closing entries at December 31,
20X1. (6) Post the closing entries to the ledger accounts. (7) Prepare
a postclosing trial balance at December 31, 20X1.