Title | Ch 3 - 4 Problem Sets Completed |
---|---|
Course | Financial Accounting |
Institution | Southern New Hampshire University |
Pages | 31 |
File Size | 2.1 MB |
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Download Ch 3 - 4 Problem Sets Completed PDF
Chapter 3 BE.03-01
BE.03-04 Adjustment for accrued expense Prospect Realty Co. pays weekly salaries of $27,600 on Monday for a six-day workweek ending the preceding Saturday. Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Friday. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Prospect Realty Co.
General Ledger
ASSETS 11 Cash 12 Accounts Receivable
REVENUE 41 Fees Earned EXPENSES
13 Supplies
51 Advertising Expense
14 Prepaid Insurance
52 Insurance Expense
15 Land
53 Rent Expense
16 Equipment
54 Salaries Expense
17 Accumulated Depreciation-Equipment 55 Supplies Expense LIABILITIES 21 Accounts Payable
56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense
22 Unearned Fees 23 Salaries Payable 24 Taxes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends
BE.03-06 Adjustment for prepaid expense The prepaid insurance account had a beginning balance of $4,500 and was debited for $16,600 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $5,600. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
General Ledger
ASSETS 11 Cash 12 Accounts Receivable
REVENUE 41 Fees Earned EXPENSES
13 Supplies
51 Advertising Expense
14 Prepaid Insurance
52 Insurance Expense
15 Land
53 Rent Expense
16 Equipment
54 Salary Expense
17 Accumulated Depreciation-Equipment 55 Supplies Expense LIABILITIES 21 Accounts Payable
56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense
22 Unearned Fees 23 Salaries Payable 24 Taxes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends Journalize the adjusting entry required at the end of the year (December 31), assuming the amount of unexpired insurance related to future periods is $5,600. Refer to the Chart of Accounts for exact wording of account titles. The prepaid insurance account had a beginning balance of $4,500 and was debited for $16,600 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $5,600.
4500 + 16600 – 5600 = 15500
BE.03-09 Effect of Errors on Adjusted Trial Balance For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. a. The adjustment for accrued wages of $5,200 was journalized as a debit to Wages Expense for $5,200 and a credit to Accounts Payable for $5,200. The totals are equal.
Enter the difference between the debit and credit totals. If the totals are equal, enter a zero. $
0
b. The entry for $1,125 of supplies used during the period was journalized as a debit to Supplies Expense of $1,125 and a credit to Supplies of $1,152. The totals are unequal; the credit total is higher.
Enter the difference between the debit and credit totals. If the totals are equal, enter a zero. $
27
EX.03-05 Adjusting entries for accrued salaries
Garcia Realty Co. pays weekly salaries of $17,250 on Friday for a five-day workweek ending on that day. Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends (a) on Wednesday and (b) on Thursday. Refer to the Chart of Accounts for exact wording of account titles. (a) Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Wednesday, March 31. Refer to the Chart of Accounts for exact wording of account titles. 17250 / 5 = 3450 * 3 = 10350
(b) Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Thursday, March 31. Refer to the Chart of Accounts for exact wording of account titles. 17250 / 5 = 3450 * 4 = 13800
a. & b. Some types of services used in earning revenues are paid for after the service has been performed. In such cases, the expense is increased. When does the accounting period end? Multiply the daily amount times this number of days to obtain the accrual amount in each situation. CHART OF ACCOUNTSGarcia Realty Co.General Ledger ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance
ASSETS 15 Land 16 Equipment 17 Accumulated Depreciation-Equipment LIABILITIES 21 Accounts Payable 22 Unearned Fees 23 Salaries Payable 24 Taxes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends REVENUE 41 Fees Earned EXPENSES 51 Advertising Expense 52 Insurance Expense 53 Rent Expense 54 Salaries Expense 55 Supplies Expense 56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense
EX.03-07 Effect of Omitting Adjusting Entry Accrued salaries owed to employees for October 30 and 31 are not considered in preparing the financial statements for the year ended October 31.
Indicate which items will be erroneously stated, because of the error, on (A) the income statement for the year and (B) the balance sheet as of October 31. Also indicate whether the items in error will be overstated or understated. Income Statement Salaries Expense Understated Net Income Overstated
Balance Sheet Salaries Payable Understated Stockholders' Equity Overstated
In essence, this mistake results in failing to record part of the salaries expense and their corresponding liability. The effect of omitting an adjusting entry on Net Income is the same as the effect on Stockholders' Equity. Also, keep in mind that the accounting equation is a depiction of the balance sheet, so understated liabilities will result in overstated Stockholders' Equity. Learning Objective 2 and Learning Objective 5 . EX.03-11 Adjusting Entry for Supplies The balance in the supplies account, before adjustment at the end of the year, is $4,850. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $880. Supplies Expense 3970 Supplies 3970
Set up a Supplies T-account. Purchases are increases to the account. 'On hand' is what is left, or the ending supplies balance. The amount used decreases supplies and is the supplies expense amount. Solve for the expense by keeping in mind that the beginning balance plus purchases (none mentioned) minus the supplies (used) expense equals the ending balance of supplies. Complete your adjusting entry by making sure that it affects at least one income statement account and one balance sheet account. Learning Objective 3 . EX.03-14 Adjusting Entries for Prepaid Insurance The balance in the prepaid insurance account, before adjustment at the end of the year, is $27,000.
Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment: The amount of insurance expired during the year is $20,250.
Set up a Prepaid Insurance T-account. Consider each situation by recalling that prepaid insurance expires and becomes an expense with the passage of time. The insurance expense is the amount needed to arrive at the given ending balance. Complete your adjusting entry by making sure that the entry affects at least one income statement account and one balance sheet account. Learning Objective 3 .
27000 – 6750 = 20250 The amount of unexpired insurance applicable to future periods is $6,750.
The unexpired amount is the ending balance to the account. Learning Objective 3 .
BE.04-01 Flow of Accounts into Financial Statements The balances for the accounts that follow appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet. Indicate whether each account would flow into the income statement, retained earnings statement, or balance sheet.
Revenue and expense accounts flow into the income statement, and asset, liability, and stockholders' equity accounts flow into the balance sheet. Net income and the dividends account flow into the statement of retained earnings. Learning Objective 1.
BE.04-02 Blake Knudson owns and operates Grab Bag Delivery Services. On January 1, 2018, Retained Earnings had a balance of $918,000. During the year, no additional common stock was issued, and $15,000 of dividends were paid. For the year ended December 31, 2018, Grab Bag Delivery reported a net loss of $43,500. Prepare a retained earnings statement for the year ended December 31, 2018. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement.
The first item normally on the statement of retained earnings is the beginning balance of the retained earnings account. This balance will be changed positively by any net income, and negatively by any net losses and dividends. Labels December 31, 2018 For the Year Ended December 31, 2018 For the Year Ended January 1, 2018 January 1, 2018 Amount Descriptions Additional investment during 2018 Change in retained earnings Dividends Retained earnings, January 1, 2018 Retained earnings, December 31, 2018 Net income Net loss
BE.04-03 Classified Balance Sheet The following accounts appear in an adjusted trial balance of Kangaroo Consulting. Indicate whether each account would be reported in the current asset; property, plant, and equipment ; current liability; long-term liability; or stockholders' equity section of the December 31, 2018, balance sheet of Kangaroo Consulting.
Assets consumed or converted to cash or sold within one year or less and liabilities that will be due within a year or less are considered to be current. Any asset or liability that is used longer than a year or operating cycle is considered to be long-term. Two common classes of assets are current assets and property, plant, and equipment. Recall that the stockholders' right to the assets of the business is stockholders' equity. Learning Objective 2.
BE.04-05 Accounting Cycle From the following list of steps in the accounting cycle, identify what two steps are missing: a. Transactions are analyzed and recorded in the journal. b. Transactions are posted to the ledger.
c. d. e. f. g. h. i. j.
An unadjusted trial balance is prepared. Adjustment data are assembled and analyzed.
An optional end-of-period spreadsheet is prepared. Adjusting entries are journalized and posted to the ledger. An adjusted trial balance is prepared. Financial statements are prepared. Closing entries are journalized and posted to the ledger.
A post-closing trial balance is prepared. Select the steps in the accounting cycle in their proper order and include the two missing steps.
Before the financial statements can be prepared, the accounts must be updated. Therefore, what step is required before preparing adjustments? Also, to ready accounts for the next accounting cycle, what step is necessary? Learning Objective 4. BE.04-04 After the accounts have been adjusted at April 30, the end of the fiscal year , the following balances were taken from the ledger of Nuclear Landscaping Co.: Retained Earnings
$643,600
Dividends
10,500
Fees Earned
356,500
Wages Expense
283,100
Rent Expense
56,000
Retained Earnings
$643,600
Supplies Expense
11,500
Miscellaneous Expense
13,000
Journalize the four entries required to close the accounts. Refer to the Chart of Accounts for exact wording of account titles.
In preparing closing entries, recall that (1) revenue accounts are debited for their balances, and the income summary account is credited for the total revenue; (2) expense accounts are credited for their balances, and the income summary account is debited for the total expense; (3) Income Summary is debited or credited for its balance, depending on whether the balance is a net income or net loss, respectively, with an equal offset to the retained earnings account; and (4) the retained earnings account is debited for the balance of the dividends account. CHART OF ACCOUNTS Nuclear Landscaping Co. General Ledger ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Rent 15 Land LIABILITIES 21 Accounts Payable 22 Unearned Fees
ASSETS 23 Wages Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends 34 Income Summary REVENUE 41 Fees Earned EXPENSES 51 Wages Expense 52 Rent Expense 53 Supplies Expense 59 Miscellaneous Expense
EX.04-02 Classifying Accounts Balances for each of the following accounts appear in an adjusted trial balance. Identify each as an asset, liability, revenue, or expense.
Assets are items owned by the business that are used in generating revenue; liabilities are obligations owed; revenue is the value of products and services sold; and expenses are assets consumed or services used. Learning Objective 1 , Learning Objective 2.
EX.04-03 Taser Consulting is a consulting firm owned and operated by Annamarie Phipps. The following end-of-period spreadsheet was prepared for the year ended October 31, 2018:
Taser Consulting End-of-Period Spreadsheet For the Year Ended October 31, 2018 Unadjusted Trial Balance Account Title Cash Accounts Receivable
Dr.
Cr.
Dr. 45,000
119,200
119,200
11,900
Office Equipment
400,000
Depreciation
Dr.
Adjusted Trial Balance
45,000
Supplies
Accumulated
Cr.
Adjustments
7,500
Cr.
4,400
400,000
56,000
6,000
62,000
Accounts
20,500
Payable
20,500
Salaries
9,000
Payable Common Stock Retained Earnings Dividends
Salary Expense
75,000
75,000
180,700
180,700
25,000
Fees Earned
25,000 800,000
520,000
Supplies Expense Depreciation Expense Miscellaneous Expense
9,000
800,000 9,000
529,000
7,500
7,500
6,000
6,000
11,100
1,132,200
11,100
1,132,200
22,500
22,500
1,147,200
1,147,200
Based on the preceding spreadsheet, prepare an income statement, retained earnings statement, and balance sheet for Taser Consulting. Be sure to read the instructions for each financial statement carefully.
Prepare an income statement for the year ended October 31, 2018 for Taser Consulting. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items other than account names. You will not need to enter colons (:) on the income statement.
Revenue and expense accounts flow into the income statement. Recall that revenues include fees earned for services. Prepare a retained earnings statement for the year ended October 31, 2018 for Taser Consulting. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items.
The first item normally on the retained earnings statement is the beginning balance of the retained earnings account. This balance will be changed positively by any net income, and negatively by any net losses and dividends.
Prepare a balance sheet as of October 31, 2018 for Taser Consulting. Fixed assets must be entered in order according to account number. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items other than account names. You will not need to enter colons (:) or the word "Less" on the balance sheet; they will automatically insert where necessary.
Assets (including contra-assets, like Accumulated Depreciation), liabilities, and the retained earnings account flow into the balance sheet. CHART OF ACCOUNTS Taser Consulting General Ledger ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Office Equipment 15 Accumulated Depreciation
ASSETS LIABILITIES 21 Accounts Payable 22 Salaries Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends 34 Income Summary REVENUE 41 Fees Earned EXPENSES 51 Salary Expense 52 Supplies Expense 53 Depreciation Expense 54 Miscellaneous Expense Labels Current assets Current liabilities Expenses For the Year Ended October 31, 2018 October 31, 2018 Property, plant, and equipment Revenues Amount Descriptions Change in retained earnings Dividends Net income Net loss Retained earnings, November 1, 2017 Retained earnings, October 31, 2018
Labels Total assets Total current assets Total expenses Total liabilities Total liabilities and stockholders’ equity Total property, plant, and equipment Total revenues Total stockholders’ equity...