Ch.4 Individual Assignment PDF

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Chapter 4 Individual Assignment Homework problems - Wiley Textbook...

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Questions (4-42) - 4,5 4. Max Wilson, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Wilson's law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why? a.

The law firm should recognize the revenue in April because the law firm prepares monthly financial statements, and the lawyer performed the work in April.

5. In completing the engagement in Question 4, Wilson pays no costs in March, $2,500 in April, and $2,200 in May (included in April). How much expense should the firm deduct from revenues in the month it recognizes the revenues? a.

$4,700 should be deducted because of the matching principle where expenses are recognized in the same period as their related revenues.

Brief Exercises (4-44) - 2,4,7 2. Transactions that affect earnings do not necessarily affect cash. Identify the effect if any that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. Cash Net Income Purchased $100 of supplies for cash. -$100 $0 Recorded an adjusting entry to record use of $20 of the above -20 0 supplies. c. Made sales of $1,300 all on account. 0 1,300 d. Received $800 from customers in payment of their accounts. 0 800 e. Purchased equipment for cash, $2,500. -2,500 0 f. Recorded depreciation of building for period used, $600. 0 600 4. The Cortina Company accumulates the following adjustment data at December 31st. Indicate one the type of adjustment and two the status of the accounts before the adjustment. a. b.

a. b. c. d.

Supplies of $400 are on hand. Supplies account shows $1,600 balance. a. Prepaid Expense: Assets Overstated, Expenses Understated Service performed but unbilled total $700. a. Accrued expense: Assets Understated, Revenues Understated Interest of $300 has accumulated on a note payable. a. Accrued Expense: Expenses Understated, Liabilities Understated Rent collected in advance totaling $1,100 has been earned. a. Unearned Expense: Liabilities Overstated, Revenues Understated

7. On July 1st, 2022, Ling Co. Pays $12,400 to Marsh Insurance Co. For a 2-year insurance contract. Both companies have fiscal years ending December 31. For Ling Co., journalize and post the entry on July 1st and the annual adjusting entry on December 31. Date Jul 1st

Account Title and Explanation Prepaid Insurance Cash December 31 Insurance Expense (12,400*6/24) Prepaid Insurance Date Prepaid Insurance 7/1 12,400 12/31 3,100 Balance (12/31)

9,300

Debit $12,400

Credit $12,400

$3,100 $3,100 Insurance Expense 3,100

Do it! (4-46) - 2 2. The ledger of Umatilla, Inc. On March 31,2022. Includes the following selected accounts before adjusting entries. 1. 2. 3. 4.

Insurance expires at the rate of $300 per month Supplies on hand total $900. The equipment depreciates $200 per month. During March, services were performed for two-fifths of the unearned service revenue.

Prepare the adjusting entries for the month of March based on the analysis of the accounts: Number 1. 2. 3. 4.

Account Title and Explanation Insurance Expense + Prepaid Insurance ASupplies expense (2500-900) Office Supplies Depreciation expense + Accumulated Depreciation Unearned service revenue – liability

300 300 1600 1600 200 200 2/5(10000) =4000 4000

Service Revenue

Exercises (4-47) -1,9,21 1. a.

b.

c.

d.

e.

Southwest Airlines sells you an advance-purchase airline ticket in September for your flight home in December. a. Revenue should be recognized in December. Ultimate Electronics sells you a home theater on a "no money down and full payment in three months" promotional deal. a. Revenue should be recorded the first month of that year/at time of delivery The Toronto Blue Jays sell season tickets online to games in the Skydome. Fans can purchase the tickets at any time, although the season doesn't officially begin until April. The major league season runs from April through October. a. Revenue should be recorded per game basis over the season. RBC Financial Group loans money on August 1. The loan and the interest are repayable in full in November. a. Evenly over the loan term. In August, a customer orders a sweater from Target website, paying with a Target credit card. The sweater arrives in September. Target sends a bill in October and receives payment in October. a. The revenues should be recorded in September

9. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense. 1.

Equipment Depreciates 280 per month. (280*3)

2. 3.

Half of the unearned rent revenue was earned during the quarter. (20,000/2) Interest of $400 is accrued on the notes payable.

4.

Supplies on hand total $850. (3000-850)

5.

Insurance expires at the rate of $400 per month. (400*3)

Dr Depreciation Expense 940 Cr Accumulated Depreciation (Equipment) 900 Dr Unearned Rent Revenue 10,000 Cr Rent Revenue 10,000 Dr Interest Expense 400 Cr Interest Payable 400 Dr Supplies Expense 2150 Cr Deferral Supplies 2150 Dr Insurance Expense 1200 Cr Prepaid Insurance 1200

21. Selected year account balances from the adjusted trial balance as of December 31, 2022 for tippy corporation. A. Prepare closing entries. Date December 31

Account Titles and Explanation Service Revenue Rent Revenue Unearned Rent Revenue Income Summary

Debit 22,900 183,800 114,800

Credit

321,500

Income Summary 109,300 Depreciation Expense Salaries and Wages Expense Supplies Expense Rent Expense B. determine the post-closing balance in Retained Earnings. Description Accounts Receivable Accumulated Depreciation Equipment Accounts Payable Retained Earnings Dividends

Debit 72,600

13,200 91,100 1,400 3,600

Credit 114,800

212,800 53,000 61,800 26,300

Problems: Set A (4-54) - 3 3. a.

b.

Journalize the adjusting entries on May 31. Number Account Title 1. Insurance Expense Prepaid Expense 2. Supplies Expense (2600-1050) Supplies 3. Depreciation Expense Accumulated Depreciation 4. Interest Expense Interest Payable 5. Unearned Rent Revenue Rent Revenue 6. Salaries and Wages Salaries and Wages

Debit 450

450 1550 1550 3,600 3,600 2,160 2,160 2,500 2,500 900 900

Prepare a ledger using T-accounts. Enter the trial balance amounts and post the adjusting entries. Date

Account title Accumulated Depreciation - Building

Debit

5/31 Balance

Credit 230 230

Equipment 5/31 Balance

16,800 16800 Accumulated Depreciation-Equipment

Credit

5/31 Balance

180 180 Accounts Payable

5/31 Balance

4,433 4,433 Unearned Rent Revenue

5/31 Balance

2500

3300 800

Salaries and Wages Payable 5/31 Balance

900 900 Interest Payable

5/31 Balance

140 140 Mortgage Payable

5/31

33,600 33,600 Common Stock

5/31 Balance

59,733 59,733 Rent Revenue

5/31

9,000 2,500 11,500

Balance c.

Prepare an adjusted trial balance on May 31 Account Title Cash Supplies Prepaid Insurance Land Buildings Accumulated Depreciation Accounts Payable Unearned Rent Revenue Mortgage Payable Equipment Rent Revenue Unearned Rent Revenue Salaries and Wages Expense Utilities Expense Depreciation Expense Advertising Expense Interest Expense Supplies Expense Insurance Expense Total Expenses

Debit 2,233 2,600 1,800 14,733 67,600

Credit

230 4,433 800 33,600 180 11,500 800 3,820 800 410 500 140 1,550 450 111,436

d.

Prepare and income statement and a retained earnings statement for May and a classified balance sheet May 31. a. Income statement Revenues Rent Revenue Expenses Salaries and Wages Expense Utilities Expense Depreciation Expense Advertising Expense Interest Expense Supplies Expense Insurance Expense Total Expenses Net Income b. Retained earnings Net Income Less Dividends Balance

e.

11,500 3,820 800 410 500 140 1,550 450 7,670 3,830 3,830 3,830

Identify which accounts should be closed on May 31. a. Rent Revenue, Salaries and wages expense, Utilities expense, Ad expense, Depreciation expense, interest expense, supplies expense, insurance expense, income summary

Expand Your Critical Thinking (4-62)- 8 8. a. Who are the stakeholders in this situation? Wells company/President of Wells company, Tim Allen (controller), Company Stockholders or any other stockholders b.

c.

What are the ethical considerations of the president's request and Tim's dating the adjusting entries December 31? i. The president placed pressure on Tim to request him to prepare incorrect adjusting entries. But it was ethical for Tim to date the adjusting entries for December 31st. Can Tim accrue revenues and defer expenses and still be ethical? i. Tim can accrue revenues and defer expenses by preparing adjusting entries and still be ethical if the entries reflect accurate data. Misrepresented the company's financial conditions is unethical and illegal....