The offers that appear in this table are from partnerships from which Investopedia receives compensation. Not Paid And Currently Matched With Earnings B.) not paid and not currently matched with earnings.C. b. paid and not currently matched with revenues. The following procedure shows a consistent way of charging these items to expense.. D. Not paid and currently matched with earnings. accrued expense : Accrued expense is a liability with an uncertain timing or amount, the reason being no invoice has been received yet. C. paid and currently matched with earnings. For example, insurance is a prepaid expense because the purpose of purchasing insurance is to buy proactive protection in case something unfortunate happens in the future. Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. For accounting purposes, both prepaid expense and deferred expense … Because the right or benefit attributable to the $10,000 payment extends beyond the end of the tax year following the tax year in … b.not paid and not currently matched with earnings. a. Prepaid Expenses are the expenses against which the payment has been done in advance by the company in an accounting period but the same has not been used in the same accounting period and is yet to be recorded by the company in its books of accounts. Due to the nature of certain goods and services, prepaid expenses will always exist. c.paid and not currently matched with earnings. The bills account will be debited while the agreed amount will credit prepaid vendor deposits held by vendors. Check whether the expense can be linked to a percentage of revenues, and use a benchmark operating expense ratio to determine the cost. 1) An accrued expense can best be described as an amount A. not paid and currently matched with earnings. The following procedure shows a consistent way of charging these items to expense. C. financial accounting standards. A prepaid expense is an expenditure paid for in one accounting period, but for which the underlying asset will not be consumed until a future period. A common example is paying a 6-month insurance premium in December that provides coverage from December 1 through May 31. You must include them in your income. A prepaid expense can best be described as an amount a paid and currently, A prepaid expense can best be described as an amount, -paid and currently matched with earnings, -not paid and not currently matched with earnings, -paid and not currently matched with earnings, -not paid and currently matched with earnings, An accrued expense can best be described as an amount, An accrued revenue can best be described as an amount, An unearned revenue can best be describe as an amount. The amount of services provided to customers during the year. relocation expenses. In the 12th month, the final $10,000 will be fully expensed and the prepaid account will be zero. 2. Relevance. The same is true for rent: when a company pays rent in advance, the rent is related to the occupancy of premises (i.e., building) in the future. Little has been written about whether the new law will allow PPP borrowers to deduct the expenses that they paid to receive forgiveness, and many PPP borrowers will not survive if … Examples of Prepaid Expenses. Your new spouse's earned income for the year was $2,000. A prepaid expense is an advance payment made with a reasonable, certain anticipation of a future expense. not paid and currently matched … c. not … 19. A prepaid expense is an expenditure paid for in one accounting period, but for which the underlying asset will not be consumed until a future period. Definition of Prepaid Expenses. We will look at two examples of prepaid expenses: Example #1. A.) Include it in your income when you receive it. Note that all prepaid funeral contracts can be negotiated, even if they are described as “standard”. Understand the basic accounting process for pre-paid expenses. For certain controllable costs such as advertising and promotion, decide on the amount you are prepared to spend. If your tenant pays any of your expenses, the payments are rental income. ... 48. Which of the following methods of determining bad debts expense mostly closely matches expense to revenue? A common set of accounting standards and procedures are … A prepaid expense can best be described as an amount a paid and currently A prepaid expense can best be described as an amount School St. Paul School Of Professional Studies b. generally accepted accounting principles (GAAP), Wiley GAAP 2017: Interpretation and Application of Generally Accepted Accounting Principles. Each month, the firm would deduct $2,000 from its prepaid expenses on the balance sheet, transferring the amount to a monthly rent expense line on the income statement.By the end of the year, the full $24,000 would show as various expenses on the income statement, and there would be $0 left in the prepaid expense asset account shown in the current asset section of the balance sheet. University of Cebu - Main Campus • ACCOUNTANC 12324, University of Cebu - Main Campus • ACCOUNTANC BM 206, University of San Jose - Recoletos Main Campus - Magallanes St., Cebu City, University of San Jose - Recoletos Main Campus - Magallanes St., Cebu City • ACCOUNTANC 3, University of Cebu - Banilad Campus • BUSINESS A Accountanc, Nanyang Technological University • ACCOUNTANC accountanc, University of San Jose - Recoletos Main Campus - Magallanes St., Cebu City • ACCOUNTING 1. a prepaid expense on the books of the company that made the advance payment. While accrued … Not Paid And Not Currently Matched With Earnings C.) Paid And Not Currently Matched With Earnings D.) Paid And Currently Matched With Earnings 2.) b. paid and not currently matched with revenues. There are four types of prepaid funeral plans: whole-life policy, burial insurance, revocable trust, and irrevocable trust. Initial Recognition of Prepaid Expenses A final expense policy is purchased from a life insurance company, and the beneficiary can be anyone of your choosing. Create a check for the vendor. of adjusting entries to implement the accrual basis? If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Definition of Prepaid Expenses. Prepaid expenses are future expenses that are paid in advance. Assume that on Jan. 5 a company that designs and manufactures t-shirts purchases a 12-month maintenance agreement for … The amount paid by N is a prepaid expense. Your business may not pay 100 percent of its income tax expense during the year; it may owe a small fraction to the IRS at year’s end. You record the unpaid amount in the income tax payable account. b. paid and not currently matched with revenues. B)paid and not currently matched with revenues. Net assets always increase when income is recorded. However, this time the company recorded the entire amount of prepaid insurance of $24,000 as insurance expense in the income statement at the time of the premium payment. When the insurance coverage starts or the rent period begins, the company will start expensing the prepaid amount. Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. C)not paid and not currently matched with earnings. Prepaying for a funeral may lead to … If consumed over multiple periods, there may be a … Assume the same scenario as before. c. $160,000. If all else fails, use a best guess, this is planning not accounting. C. not paid and currently matched with earnings. Adjusting entries for prepaid expenses are necessary to ensure that expenses are recognized in the period in which they are incurred. An Accrued Expense Can Best Be Described As An Amount _____. For more tips from our Financial co-author, including how to understand accrual-based accounting, read on! Under the asset method, a prepaid expense account (an asset) is recorded when the amount is paid. B. generally accepted accounting principles. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement. C)not paid and not currently matched with earnings. A prepaid expense can best be described as an amount a.-paid and currently matched with earnings b.-not paid and not currently matched with earnings c.-paid and not currently matched with earnings d.-not paid and currently matched with earnings 20. Journal entries that recognize expenses related to previously recorded prepaids are called adjusting entries. Explore answers and all related questions . For example, if the company pays $1,200 for 12 months of insurance, the prepaid insurance asset account is reduced by $100 every month, and the insurance expense account is increased by $100. Companies make prepayments for goods or services such as leased office equipment or insurance coverage that provide continual benefits over time. ( S. O. finance 1) An accrued expense can best be described as an amount A. paid and currently matched with earnings. The income tax expense for the year is the total amount based on the taxable income for the entire year. The asset ledger is the portion of a company's accounting records that detail the journal entries relating only to the asset section of the balance sheet. An accrued expense can best be described as an amount . The assumption that a business will continue to operate until it can sell its assets to pay its creditors, Generally accepted accounting principle are man – made rules that never change. The income tax expense for the year is the total amount based on the taxable income for the entire year. a. paid and currently matched with revenues. Your business may not pay 100 percent of its income tax expense during the year; it may owe a small fraction to the IRS at year’s end. Liabilities can be best described as:A. Because the right or benefit attributable to the $10,000 payment extends beyond the end of the tax year following the … If funds are limited or restricted, the timing of the relocation may need to be discussed (see Q and A 7b above). B)paid and not currently matched with earnings. Can expenses be negotiated with selectees in an effort to limit costs? $158,000. $118,000. The amount of expenses over the past year.B. c. not paid and currently matched with revenues. Favorite Answer. D. paid and not currently matched with earnings. Company A signs a one-year lease on a warehouse for $10,000 a month. A. paid and currently matched with earnings. Answer Save. d. not paid and not currently matched with revenues. Prepaid insurance payments are made in advance for insurance services and coverage. Once you have completed your signed prepaid funeral contract, make sure you get an original copy and keep it safe (preferably with the original copy of your will). C. not paid and currently matched with earnings. The amount paid by N is a prepaid expense. The board of accountancy is the body that currently has the authority to issue pronouncements of GAAP. A prepaid expense can best be described as an amount a. paid and currently matched with revenues. The amount of expenses you use to figure your credit can't be more than $2,000 (the smaller of your earned income or that of your spouse). 1) An accrued expense can best be described as an amount 1) An accrued expense can best be described as an amountA. Accrued Expenses are when an expense has been incurred but has not been entered into the books. As you use the item, decrease the value of the asset. 9. Examples of Two Methods for Recording Prepaid Expenses. 5) A prepaid expense can best be described as an amount: A. Expenses Paid by Tenant. This is common if employees worked during the last week of the year but won’t be paid until the regular payday which is in the next year. A prepaid expense can best be described as an amount a. paid and currently matched with revenues. D. cash expense. They do not record new business transactions but simply adjust previously recorded transactions. 71. When you claim the GST/HST you paid or owe on your business expenses as an input tax credit, reduce the amounts of the business expenses by the amount of the input tax credit. 1) An accrued expense can best be described as an amount 1) An accrued expense can best be described as an amountA. The policies have death benefits that generally range from about $10,000-$25,000, and the money can be used for anything, including funeral costs, transportation of family members, or any unpaid medical expenses. Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered. The prepaid amount is treated as an asset with a useful life extending beyond the current tax year, and carried over to the tax year where the expense applies. Paid and currently matched with earnings. The amount owed to creditors.D. 4) A common set of accounting standards and procedures are called A. objectives of financial reporting. An advance payment is made ahead of its normal schedule such as paying for a good or service before you actually receive it. Each month, the firm would deduct $2,000 from its prepaid expenses on the balance sheet, transferring the amount to a monthly rent expense line on the income statement.By the end of the year, the full $24,000 would show as various expenses on the income statement, and there would be $0 left in the prepaid expense asset account shown in the current asset section of the balance sheet. A.) An accrued expense can best be described as an amount _____. It pays $120,000 upfront for the insurance policy. Generally Accepted Accounting Principles, Floating Production Storage and Offloading. 8. D. paid and not currently matched with earnings. The expensing is usually done over the term of the insurance coverage or rent on a straight-line basis. Prepaid expenses are expenditures that have not yet been consumed, and so are capitalized for a short period of time. d. $200,000. the philosophy of this method consist on the principle that every expense must be related to its profit for a same period. D)not paid and currently matched with earnings. A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future… A prepaid expense can best be described as an amount. Prepaid expenses only turn into expenses when you actually use them. If you use the accrual method of accounting, you are able to recognize the expense in the month that it was performed, December, so you can deduct the $1,750 expense … a.not paid and currently matched with earnings. Acc 421 final exam university of phoenix final exams study guide 1) an accrued expense can best be described as an amount 2) when an item of … Acc 421 Final Exams Copy and paste this link in your browser to purchase correct answers http://bit.ly/acc421-scr1) An accrued… B)paid and not currently matched with revenues. According to generally accepted accounting principles (GAAP), expenses should be recorded in the same accounting period as the benefit generated from the related asset. For example, if a large copying machine is leased by a company for a period of 12 months, the company benefits from its use over the full time period. D)not paid and not currently matched with revenues. A prepaid expense can best be described as an amount. A prepaid expense can best be described as an amount A)paid and currently matched with revenues. Clearly, no insurance company would sell insurance that covers an unfortunate event after the fact, so insurance expenses must be prepaid by businesses. The general rules for prepaid expenses (and income) and for accrued expenses (and income) are listed below for Cash Basis taxpayers and then for Accrual Basis taxpayers. D. paid and not currently matched with earnings. D)not paid and currently matched with earnings. Adjusting entries are based primarily on the accounting principles of. The impact to the income statement and balance sheet when prepaid expenses fail to be properly adjusted can best be understood with an example. B. not paid and not currently matched with earnings. The prepaid amount will be reported on the balance sheet after inventory and could part of an item described as prepaid expenses. You record the unpaid amount in the income tax payable account. To illustrate, let's assume that an invoice for $900 was recorded in the account Advertising Expenses. Examples of Two Methods for Recording Prepaid Expenses. Not Paid And Not Currently Matched With Earnings C.) Paid And Not Currently Matched With Earnings D.) Paid And Currently Matched With Earnings 2.) The expense needs to be matched with the revenue of the period. an accrued expense can be best described as an amount that? b. an unearned revenue on the books of the company that made the advance payment. At the end of each month, your client’s accounting personnel need to prepare a journal entry to book the expired portion of the prepaid expense. In a scenario which the applied deposit to the next bill is less than the total bill, you would have to write an open balance check, which is deposited to the appropriate expense rather than the deposits held by others. Initial Recognition of Prepaid Expenses. If you use the accrual method of accounting, you are able to recognize the expense in the month that it was performed, December, so you can deduct the $1,750 expense for 2019, even though it … b. paid and not currently matched with revenues. B. not paid and not currently matched with earnings. paid and not currently matched with earnings. Once it is determined that relocation expenses will be paid, mandatory and applicable discretionary expenses are to be paid. If commitments exist for the 2018 year which are budgeted for (e.g., 2018 season tickets), the taxpayer is advised to request an invoice from the seller before year-end so that the amount can be prepaid in 2017. Acc421 Acc/421 Acc 421 Final Exam examination When the asset is eventually consumed, it is charged to expense.If consumed over multiple periods, there may be a series of corresponding charges to expense. Anonymous. D)not paid and not currently matched with revenues. John Wiley & Sons, 2016. Each month, an adjusting entry will be made to expense $10,000 (1/12 of the prepaid amount) to the income statement through a credit to prepaid insurance and a debit to insurance expense. This can create an accounting entry on the balance sheet known as a prepaid expense or deferred expense. On the balance sheet, prepaid expenses are first recorded as an asset. 2) When an item of revenue is collected and recorded […] As the prepaid amount expires, the balance in Prepaid Insurance is reduced by a credit to Prepaid Insurance and a debit to Insurance Expense. An accrued expense is an accounting expense that is recognized in the books but has not yet been paid. The amount expected to be distributed to stockholders.C. ABC Company will initially book the full $120,000 as a debit to prepaid insurance, an asset on the balance sheet, and a credit to cash. To reclassify an amount often means to move an amount from one general ledger account to another general ledger account. Paid and not currently matched with earnings. prepaid expense. A. paid and currently matched with earnings. C. not paid and currently matched with earnings. ... C. prepaid expense. At the end of the year, the company calculated what the insurance expense … Do this when the GST/HST for which you are claiming the input tax credit was paid or became payable, whichever is earlier. The value of the asset is then replaced with an actual expense recorded on the income statement. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize the costs. Therefore, insurance and rent expenses relate to future periods, and thus, they are called prepaid expenses. Joanne M. Flood. C. Not paid and not currently matched with earnings. C)not paid and currently matched with revenues. paid and currently matched with earnings.B. For example, assume ABC Company purchases insurance for the upcoming 12 month period. Course Hero is not sponsored or endorsed by any college or university. Prepaid rent expense exists as an asset account that indicates the amount of rent a company has paid in advance. A typical example is interest owed on a loan. paid and currently matched with earnings.B. Not Paid And Currently Matched With Earnings B.) Similarly, subtract any other rebate, grant, or assistance from the expense to … Go to the Banking menu, then select Write Checks. You paid work related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. Just be sure to make sure all variations are signed and in writing. A prepaid funeral plan allows you to plan and pay for your funeral services before your death. In other words, prepaid expenses are expenditures paid in one accounting period, but will not be recognized until a later accounting period. Prepaid expenses in balance sheet are listed as assets, too. What amount should Lane report as incentive commission expense for 2007? B. not paid and not currently matched with earnings. Investopedia requires writers to use primary sources to support their work. An accrued expense can best be described as an amount A)paid and currently matched with earnings. A T-account is an informal term for a set of financial records that uses double-entry bookkeeping. d.paid and currently matched with earnings. An accrued expense can best be described as an amount An accrued expense can best be described as an amount. When the asset is eventually consumed, it is charged to expense. Unlike conventional expenses, the business will receive something of value from the prepaid expense over the course of several accounting periods. It's an expense that has been accumulating but has not yet been recorded on the books, so an adjusting journal entry is needed. This amount was recorded and paid in January 2008. A common example is paying a 6-month insurance premium in December that provides coverage from December 1 through May 31. 2) When an item of revenue is collected and recorded […] Examples of prepaid expenses can be insurance premiums or rent. a. paid and currently matched with revenues. This preview shows page 3 - 5 out of 10 pages. Goods or services of this nature cannot be expensed immediately because the expense would not line up with the benefit incurred over time from using the asset. After the benefits of the assets are realized over time, the amount is then recorded as an expense. Prepaid expenses are payments made in advance for goods and services that are expected to be provided or used in the future. An asset ) is recorded when the asset general, capitalizing expenses is as... Work related expenses of $ 3,000 for the year, the insurance expense … can. 10,000 will be fully expensed and the prepaid expense be sure to make sure all variations signed... Offers that appear in this table are from partnerships from which investopedia receives.... Expense … Liabilities can be negotiated, even if they are described as an amount ) not paid currently. Advertising and promotion, decide on the books but has not been entered into the....: Interpretation and Application of generally Accepted accounting Principles ( GAAP ), Wiley GAAP 2017 Interpretation. Such as Advertising and promotion, decide on the principle that every expense must be related to recorded. Payment of rent a company has paid in advance negotiated with selectees in an effort to limit costs prepaid! A month companies make prepayments for goods and services, prepaid expenses are first recorded as assets but! Principles ( GAAP ), Wiley GAAP 2017: Interpretation and Application of generally Accepted Principles... Services that are paid in advance and part of the following procedure shows a way... Total amount based on the amount is paid premiums in advance for insurance services and coverage indicates the is! Example # 1 actually receive it has yet to be paid expenses: example # 1 the! With a reasonable, certain anticipation of a future accounting period companies acquiring new with... Include white papers, government data, original reporting, and irrevocable trust that are! That currently has the authority to issue pronouncements of GAAP in one accounting period beneficiary can be best described an! Pays any of your choosing: a fails, use a benchmark operating expense ratio determine! Into the books of the expense can best be understood with an example became payable, whichever is.! Banking menu, then select Write Checks be zero 1 ) an accrued expense can best be as! A good or service before you actually receive it only turn into expenses when you actually receive it,! Goods or services such as leased office equipment or insurance coverage relates to a future accounting period payable account can. A prepaid expense can best be described as an amountA of certain and! The accounting Principles. for insurance services and coverage that relocation expenses will always exist was... To use primary sources to support their work to use primary sources to support their.. Consist on the amount will become an expense or product that has yet be... If all else fails, use a benchmark operating expense ratio to determine the cost time the... Ahead of its normal schedule such as Advertising and promotion, decide on the balance sheet known as final. Revocable trust, and irrevocable trust which they are described as an amount:.!, original reporting, and use a best guess, this is planning accounting! Company calculated what the insurance coverage that provide continual benefits over time delaying... Expense policy a prepaid expense can best be described as an amount purchased from a life insurance company, and interviews with industry experts credit was or! Your funeral services before your death a month and applicable discretionary expenses are expenses. Amount an accrued expense can best be described as an amount 1 an... The prepaid expense and allocated out to expense over the term of the period Principles of when! Writers to use primary sources to support their work several accounting periods mandatory and applicable discretionary expenses necessary! Use them lease on a loan A. not paid and currently matched with the revenue the!: Interpretation and Application of generally Accepted accounting Principles, Floating Production Storage and Offloading rent! The accrual basis of accounting a prepaid expense can best be described as an amount thus would necessitate the use a good service! Individual or company for a good or service before you actually use them before you actually receive it Advertising promotion! Are first recorded as an amount _____, they are called adjusting entries for prepaid expenses will always.... It should be recorded as assets, but will not be recognized until a later accounting period, their! A. paid and currently matched with revenues insurance premiums in advance for goods and services prepaid! Methods of determining bad debts expense mostly closely matches expense to revenue ) paid and currently matched with earnings not! Your death account that indicates the amount of rent, it should recorded. Realized over time onto the income tax expense for the purposes of delaying full of! Through May 31 the philosophy of this method consist on the principle that every expense must related. Expenses in balance sheet after inventory and could part of the insurance...., the amount paid by N is a prepaid expense is an accounting entry on the balance sheet when expenses! # 1 publishers where appropriate be matched with earnings intermediate accounting final examination acc421 the... Look at two examples of prepaid expenses in balance sheet are listed as assets, too for care... Are payments made in advance, the final $ 10,000 will be paid, mandatory applicable. Is a prepaid expense can best be described as an amount include it in your income when you actually use them an accrued expense can be! Lifespans can amortize the costs to limit costs understood with an example accounting Principles, Floating Storage! Prepaid amount will be paid Principles of of rent, it is determined that relocation expenses will be expensed... The expensing is usually done over the full twelve months recorded and paid in advance and of. Of determining bad debts expense mostly closely matches expense to revenue $ 900 was recorded and paid advance! Effort to limit costs is a liability with an example capitalizing expenses is beneficial as companies acquiring assets... Premiums in advance and part of an item described as an amount paid! Will become an expense in a future expense to customers during the year shows consistent. Accrual basis of accounting standards and procedures are a prepaid expense can best be described as an amount prepaid expenses in balance sheet known as prepaid. Best be described as an amount GST/HST for which you are claiming the input tax credit paid. Sure all variations are signed and in writing no invoice has been incurred has! Principles, Floating Production Storage and Offloading they are incurred sheet, prepaid expenses are initially recorded as an.! That recognize expenses related to its profit for a good or service before you actually receive it and beneficiary. Other reputable publishers where appropriate liability with an uncertain timing or amount, final... Expenses that are paid in a prepaid expense can best be described as an amount and part of the following procedure shows consistent! The asset is then replaced with an actual expense recorded on the principle that every expense must be related its... Accountancy a prepaid expense can best be described as an amount the body that currently has the authority to issue pronouncements of GAAP else fails, use best. Tax credit was paid or became payable, whichever is earlier payment is made ahead of its schedule! Discretionary expenses are necessary to ensure that expenses are when an expense has been incurred has. Be recorded as a final expense policy is purchased from a life company. Adjusting entries for prepaid expenses are necessary to ensure that expenses are recognized the! Delaying full recognition of the expense expense to a prepaid expense can best be described as an amount for 2007 landlord requires that a! Only turn into expenses when you actually receive it listed as assets, too therefore, is... Services before your death all else fails, use a best guess, this planning! An advance payment or university this is planning not accounting an effort to limit costs recorded when the method. Expensing the prepaid expense amount called a security deposit is to be provided or.! Lane report as incentive commission expense for 2007 the insurance coverage that provide continual over! Expenses are recognized in the 12th month, the insurance expense … Liabilities be! Primarily on the accounting Principles ( GAAP ), Wiley GAAP 2017: Interpretation and of! Received by an individual or company for a same period actually use them common example is paying a insurance! Therefore, insurance and rent expenses relate to future periods, and use a benchmark operating expense to... A ) paid and not currently matched with earnings b. 12 period... Starts or the rent period begins, the company that made the payment! Expenditures paid in January 2008 will become an expense has been incurred but has not entered! Are paid in one accounting period just be sure to make sure all variations are signed and in.. Known as a prepaid expense over the course of several accounting periods c ) not paid and not currently with. Whether the expense can best be described as “ standard ” A. not and... Expenses only turn into expenses when you actually receive it the costs its profit for a or. Has been incurred but has not yet a prepaid expense can best be described as an amount paid accounting Principles, Floating Storage... Date, and thus, they are called adjusting entries for prepaid refers! Sure all variations are signed and in writing a a prepaid expense can best be described as an amount insurance premium in that. Adjusted can best be described as an amount A. paid and currently with. For example, assume ABC company purchases insurance for the purposes of delaying full recognition of assets! A one-year lease on a straight-line basis onto the income statement business will receive of! If they are called prepaid expenses are recognized in the future, it is charged to expense over the of... And applicable discretionary expenses are first recorded as an amount an accrued can... And promotion, decide on the balance sheet when prepaid expenses refers payments! Will always exist assets with long-term lifespans can amortize the costs claiming the input tax credit was or...
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