$1.$ Davos Company performed services on account for $$68,500$ in Year $1.$ Davos collected $$54,800$ cash from accounts receivable during Year $1,$ and the remaining $$13,700$ was collected in cash during Year $2.$

Required

a$.$ e$.$ & f$.$ Record the Year $1$ transactions in T$-$accounts and close the Year $1$ Service Revenue account to the Retained Earnings account. Record the Year $2$ cash collection in the appropriate T$-$accounts.

b$.$ & g$.$ Show the Year $1$ and Year $2$ transactions in a horizontal statements model.

c$.$ Determine the amount of revenue Davos would report on the Year $1$ income statement.

d$.$ Determine the amount of cash flow from operating activities Davos would report on the Year $1$ statement of cash flows.

h$.$ Assuming no other transactions occur in Year $2,$ determine the amount of net income and the net cash flow from operating activities for Year $2.$

Performed $$20,100$ of services on account.

Collected $$15,900$ cash on accounts receivable.

Paid $$4,500$ cash in advance for an insurance policy.

Paid $$1,050$ on accounts payable.

Recorded the adjusting entry to recognize $$3,800$ of insurance expense.

Received $$6,100$ cash for services to be performed at a later date.

Purchased land for $$1,930$ cash.

Purchased supplies for $$800$ cash.

Required

Record each of the preceding transactions in general journal form and then show the effect of the transaction in a horizontal statements model. The first transaction is shown as an example.

Transaction

Account Title

Debit

Credit

a

Accounts receivable

$20,100$

Service revenue

$20,100$

Record each of the preceding transactions in general journal form.

Show the effect of the transaction in a horizontal statements model. The first transaction is shown as an example.

$3.$ Cherokee Company began operations when it issued common stock for $$101,500$ cash. It paid $$91,350$ cash in advance for a one$-$year contract to lease delivery equipment for the business. It signed the lease agreement on March $1,$ Year $1,$ which was effective immediately. Cherokee received $$116,725$ of cash revenue in Year $1.$

Required

a$.$ & b$.$ Record the March $1$ cash payment and adjustment required as of December $31,$ Year $1$ in general journal format.

c$.$ Show all events in a horizontal statements model.

d$.$ & e$.$ What amount of net income will Cherokee Company report on the Year $1$ income statement? What is the amount of net cash flow from operating activities for Year $1?$ Determine the amount of prepaid rent Cherokee Company would report on the December $31,$ Year $1,$ balance sheet.

$4.$ On December $31,$ Year $1,$ BIG Company had accrued salaries of $$10,200.$

Required

a$.$ Record in general journal format the adjustment required as of December $31,$ Year $1.$

b$.$ Show the above adjustment in a horizontal statements model.

c$-1.$ Determine the amount of net income BIG would report on the Year $1$ income statement, assuming that BIG received $$27,400$ of cash revenue.

c$-2.$ What is the amount of net cash flow from operating activities for Year $1?$

d$.$ What amount of salaries payable would BIG report on the December $31,$ Year $1,$ balance sheet?

$5.$ Required

On December $31,$ Year $2,$ Morgan Company had the following normal account balances in its general ledger. Use this information to prepare a trial balance.

Land

$$24,550$

Unearned Revenue

$17,900$

Dividends

$4,950$

Prepaid Rent

$7,000$

Cash

$60,630$

Salaries Expense

$13,500$

Accounts Payable

$2,080$

Common Stock

$26,500$

Operating Expenses

$15,900$

Office Supplies

$2,100$

Advertising Expense

$2,600$

Retained Earnings, Beginning

$14,330$

Service Revenue

$76,790$

Accounts Receivable

$6,370$

$6.$ The following financial information was taken from the books of Zone Health Club, a small spa and fitness club.

Account Balances as of December $31,$ Year $2$

Accounts Receivable

$$28,900$

Accounts Payable

$7,120$

Salaries Payable

$11,800$

Cash

$41,900$

Dividends

$5,200$

Operating Expenses

$2,670$

Prepaid Rent

$2,800$

Rent Expense

$7,400$

Retained Earnings, Beginning

$19,000$

Salaries Expense

$31,200$

Service Revenue

$72,770$

Supplies

$440$

Supplies Expense

$2,470$

Common Stock

$18,700$

Unearned Revenue

$7,090$

Land

$13,500$

Required

a$.$ Prepare the journal entries necessary to close the temporary accounts at December $31,$ Year $2,$ for Zone Health Club.

b$.$ What is the balance in the Retained Earnings account after the closing entries are posted?