Competency Apply the principles of accrual accounting and accounting cycles. Scenario The Director of Accounting has some concerns about the month-end close cutoff procedures that are currently in place at County General Hospital and is looking to you for some recommendations. Their main concern is that not all revenues and expenses are recorded in the proper months. This is of particular concern because the fiscal year end (December 31st) is coming up, and the Director of Accounting does not want any audit adjustments. Instructions The director has formally reached out to you via email with a list of transactions that they are concerned about: 1. The company delivered services in September $10,000 payment that was made in November. 2. The company is 80% done on a $50,000 contract for services but have not billed the client yet. 3. On December 1st the company purchased a one-year insurance policy on behalf of their executives for $12,000 and debited prepaid insurance. 4. The companies last pay period ends on December 24th. The biweekly payroll is consistent at $500,000 per pay period. 5. Interest payment on the company bonds ($1,000,000 face value, 6%) is made semiannually on January 15th and July 15th. 6. The company’s electric meter is read on the 15th of each month, and the bill is not received until the first of the following month. The electric bill is consistently running $5,000 per month. 7. The company utilizes a storage facility on the other side of town. The landlord, as part of an inducement to the company, has agreed to delay the December cash payment for use until January 15th of next year. The company signed a monthly rental agreement of $2,000 per month on December 1st. The direction has also asked the following questions: 1. Will these transactions require an adjusting entry? Why? 2. Is it an accrual or deferral and give your justification? 3. What are the accounts that will be debited and credited for this entry? The director closes the email by asking that you create a memo with your findings that they can take to the Vice President of Accounting.