Adjustments needed for Journal Entries, Adjusted Trial Balance, Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flow, Closing Entries, Post Closing Trial Balance

ABC Corporation Unadjusted Trial Balance December 31, 2014 3 4 Credit Debit $ 975,232 167,000 190,300 $ 350,000 24,600 177,824 75,000 150,000 4,000 60,000 20,000 37,500 5 6 Cash 7 Short term investments 8 Fair value adjustment (Trading) 9 Accounts receivable 10 Allowance for doubtful accounts 11 Inventory 12 Purchases 13 Prepaid insurance 14 LT Debt) investments (HTM) 15 Land 16 Building 17 Accumulated depreciation building 18 Equipment 19 Accumulated depreciation: equipment 20 Patent 21 Accounts payable 22 Notes payable 23 Income taxes payable 24 Uneamed rent revenue 25 Bonds Payable 26 Premium on Bonds Payable 27 Common stock 28 PIC In Excess of Par-Common Stock 29 Retained earnings 30 Treasury stock 31 Dividends 32 Sales Revenue 33 Advertising expense 34 Wages expense 35 Office expense 36 Amortization expense 75,240 235,000 63,800 36,000 800,000 61,771 86,000 13,000 49,000 41,000 1,192,945 8,400 67,600 21,700 24,000 350,000 24,600 177,824 75,000 150,000 4,000 60,000 20,000 37,500 20 Allowance for doubtful accounts 11 Inventory 12 Parchases 13 Prepaid insurance 14 LT (Debt) investments (HTM 15 Land 16 Building 17 Accumulated depreciation building 18 Equipment 19 Accumulated depreciation: equipment 20 Patent 21 Accounts payable 22 Notes payable 23 Income taxes payable 24 Unearned rent revenue 25 Bonds Payable 26 Premium on Bonds Payable 27 Common stock 28 PIC In Excess of Par-Common Stock 29 Retained earnings 30 Treasury stock 31 Dividends 32 Sales Revenue 33 Advertising expense 34 Wages expense 35 Office expense 36 Amortization expense 37 Depreciation expense 38 Utilities expense 39 Insurance expense 40 Income taxes expense 41 75,240 235,000 63,800 36,000 800,000 61,771 86,000 13,000 49,000 41,000 1,192,945 8,400 67,600 21,700 24,000 31,000 73,800 63,800 $ 2,587,756 $2,587,756 42 43 44 Instructions Unadjusted Trial Balance Adjustments Needed Type here to search Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14 Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entey is correct. 2 Depreciation expense must be recorded for the month of December The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight-line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November 3 on December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December I was as follows: Dr Cash 36,000 Cr Uneamed cent revenue 36,000 The neamed revenue account must be adjusted to reflect the amount eamed as of 12/31/14 1 B D F G H 4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14. st 5 On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item Dr Cash 235,000 Cc Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note. 5 6 7 39 40 41 42 6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $75,000, which reflects historical cost. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. 43 44 45 46 47 48 49 Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory leve A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail Be sure to make an additional adjustment, if necessary, to properly value ending inventory ming the Los and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for account for adjustments of inventory to market value 50 51 5 Clipboard Font Alignment Number fx A B D E F Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail Be sure to make an additional adjustment, if necessary, to properly value ending inventory using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Los Method for accounting for adjustments of inventory to market value. 7 It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. 3 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock 51 52 53 64 65 of $7 9 On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price to reflect the issuance of the stock on 12/31/14. per share. Prepare ABC's joumal ento 66 67 68 69 70 71 72 10 On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in an effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is pavable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14 Hint Develop an abbreviated amortization schedule to accurately determine the interest expense. Clipboard Font Alignment H91 B G K - 76 77 80 AA D E F H L M 73 74 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. 75 Securities Cost Fur Value 2,200 shares of Toyota Corporation Common Stock $ 100,000 $ 125,000 78 1,100 shares of GM. Corporation Common Stock $ 67,000 $ 34,000 79 $ 167.000 $ 159,000 Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading 81 82 83 12 On 1/1/14, ABC Corporation purchased, as a held-to-matunty investment, $200,000 of the 8%, 5-year bonds of Intut Corporation for $177,824, 84 which provides an 11% return. Prepare ABC's 12/31/14 joumal entry to reflect the receipt of animal interest and discount amortization. 85 Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used 86 Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the 87 investment account. 88 89 90 13 ABC Corporation prepares an agung schedule on 12/31/14 that estimates total collectible accounts at $25,000. Assuming that the allowance method is used, 91 prepare the entry to record bad debt expense. 92 93 94 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery relucle. The terms of the lease called for ABC to Corporation to make 95 payments of $10,503 at the beginning of each year, starting January delivery vehicle has an estimated useful life of 6 years and a $7,000 96 unguaranteed residual valse. The delivery vehicle tevests back to the lessor at the end of the lease term ABC Corporation amortizes the delivery vehicle. ABC Corporation's incremental borrowing rate is 10, and the Lessor's implicit rate is unknown. No entries have yet been made concering this lease arrangement. After determining the type of lense arrangement financmg or operating), prepare the necessary multiple-part joum entry for 2014 for ABC Corporation Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for 100 this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity 101 102 103 15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pensa plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan is Note Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entet 97 98 99 104 105 106 107 105 the delivery vehicle. ABC Corporations incremental bottowing cate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. Aftet determining the type of lease accangement (financug or operating), prepare the necessary multiple-part journal 9 enter for 2014 for ABC Corporation. (Hunts: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for 30 this lease transaction. Also for Statement of Cash Flow purposes, the principal portion of lense payments are comtectlr categorized as a financing activity) 01 02 103 15 ABC Corporation provides a defned benefit pension plan for its emplovees. A combination adjusting entry should be made to correctly account for this type of pention 104 plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contabution to the pension plan in 2014 Note: Use the mmmary entey method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting enter 106 107 Pension antet/hability (January 1) SO 108 Actual tetum on planets $40,000 109 Expected return on plan assets $20,000 110 Contributions (founding in 2014 $37,000 111 Fair valse of plan assets ember 31) $75,000 112 Settlement rate 10% 113 Projected benefit obligation (Jamuary 1) SO 114 Service cost $60,000 115 Benefits paid in 2014 SO 116 *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Leability as long-term in nature. 117 118 16 On December 31, 2014, ABC Corporation med 1,000 shares of restacted stock to its clef Funancial Office ABC stock had a fair value (closing market price) of $10 per shate on December 31, 2014. Additional information is as follows 120 a. The service period related to the restricted stock is 2 years 121 b. Vesting out if the CFO stay with the company for two-year period 122 par value of the common stock $3 per share 123 Make the appropriate accounting entry as of the grant date, 12/31/14. Note me the alternative method as descobed in ou textbook for defected compensation 124 125 Do the step after preparing the Incow Statwwwxwer for the Increw lawrlws (low wwd to calware I Before Iwan Tzu i order to enwalte totale Tax Exu) 126 17 Corporate taxes are due in four estimated quarter payments on April 15. June 15, September 15, and December 15. 127 However, for the purposes of this ABC station, we will assume that estimates are not paid, and that the tax is paid in full 128 on the return's March 15, 2015 due date 129 ABC's income tax rate is 40%. The entire yest's come tax expense was estimated at the beginning of 2014 to be $69,600, 130 10 Jamry through November income tax expense recognized amount to $63,800 (11/12 months). 131 Since we are amming estimates are not made during the year, the balance in Income taxes payable represents 132 tax cemed for January through November Amme no defeered tax antets or deferred tax liabilities 133 Based on the income before income taxes figure from the come statement, record December's income tax expense 134 so that the entire rear's total tax expense is correct 135 136 137 138 139 119 c. The + ABC Corporation Unadjusted Trial Balance December 31, 2014 3 4 Credit Debit $ 975,232 167,000 190,300 $ 350,000 24,600 177,824 75,000 150,000 4,000 60,000 20,000 37,500 5 6 Cash 7 Short term investments 8 Fair value adjustment (Trading) 9 Accounts receivable 10 Allowance for doubtful accounts 11 Inventory 12 Purchases 13 Prepaid insurance 14 LT Debt) investments (HTM) 15 Land 16 Building 17 Accumulated depreciation building 18 Equipment 19 Accumulated depreciation: equipment 20 Patent 21 Accounts payable 22 Notes payable 23 Income taxes payable 24 Uneamed rent revenue 25 Bonds Payable 26 Premium on Bonds Payable 27 Common stock 28 PIC In Excess of Par-Common Stock 29 Retained earnings 30 Treasury stock 31 Dividends 32 Sales Revenue 33 Advertising expense 34 Wages expense 35 Office expense 36 Amortization expense 75,240 235,000 63,800 36,000 800,000 61,771 86,000 13,000 49,000 41,000 1,192,945 8,400 67,600 21,700 24,000 350,000 24,600 177,824 75,000 150,000 4,000 60,000 20,000 37,500 20 Allowance for doubtful accounts 11 Inventory 12 Parchases 13 Prepaid insurance 14 LT (Debt) investments (HTM 15 Land 16 Building 17 Accumulated depreciation building 18 Equipment 19 Accumulated depreciation: equipment 20 Patent 21 Accounts payable 22 Notes payable 23 Income taxes payable 24 Unearned rent revenue 25 Bonds Payable 26 Premium on Bonds Payable 27 Common stock 28 PIC In Excess of Par-Common Stock 29 Retained earnings 30 Treasury stock 31 Dividends 32 Sales Revenue 33 Advertising expense 34 Wages expense 35 Office expense 36 Amortization expense 37 Depreciation expense 38 Utilities expense 39 Insurance expense 40 Income taxes expense 41 75,240 235,000 63,800 36,000 800,000 61,771 86,000 13,000 49,000 41,000 1,192,945 8,400 67,600 21,700 24,000 31,000 73,800 63,800 $ 2,587,756 $2,587,756 42 43 44 Instructions Unadjusted Trial Balance Adjustments Needed Type here to search Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14 Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entey is correct. 2 Depreciation expense must be recorded for the month of December The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight-line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November 3 on December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December I was as follows: Dr Cash 36,000 Cr Uneamed cent revenue 36,000 The neamed revenue account must be adjusted to reflect the amount eamed as of 12/31/14 1 B D F G H 4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14. st 5 On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item Dr Cash 235,000 Cc Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note. 5 6 7 39 40 41 42 6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $75,000, which reflects historical cost. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. 43 44 45 46 47 48 49 Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory leve A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail Be sure to make an additional adjustment, if necessary, to properly value ending inventory ming the Los and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for account for adjustments of inventory to market value 50 51 5 Clipboard Font Alignment Number fx A B D E F Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail Be sure to make an additional adjustment, if necessary, to properly value ending inventory using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Los Method for accounting for adjustments of inventory to market value. 7 It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. 3 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock 51 52 53 64 65 of $7 9 On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price to reflect the issuance of the stock on 12/31/14. per share. Prepare ABC's joumal ento 66 67 68 69 70 71 72 10 On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in an effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is pavable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14 Hint Develop an abbreviated amortization schedule to accurately determine the interest expense. Clipboard Font Alignment H91 B G K - 76 77 80 AA D E F H L M 73 74 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. 75 Securities Cost Fur Value 2,200 shares of Toyota Corporation Common Stock $ 100,000 $ 125,000 78 1,100 shares of GM. Corporation Common Stock $ 67,000 $ 34,000 79 $ 167.000 $ 159,000 Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading 81 82 83 12 On 1/1/14, ABC Corporation purchased, as a held-to-matunty investment, $200,000 of the 8%, 5-year bonds of Intut Corporation for $177,824, 84 which provides an 11% return. Prepare ABC's 12/31/14 joumal entry to reflect the receipt of animal interest and discount amortization. 85 Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used 86 Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the 87 investment account. 88 89 90 13 ABC Corporation prepares an agung schedule on 12/31/14 that estimates total collectible accounts at $25,000. Assuming that the allowance method is used, 91 prepare the entry to record bad debt expense. 92 93 94 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery relucle. The terms of the lease called for ABC to Corporation to make 95 payments of $10,503 at the beginning of each year, starting January delivery vehicle has an estimated useful life of 6 years and a $7,000 96 unguaranteed residual valse. The delivery vehicle tevests back to the lessor at the end of the lease term ABC Corporation amortizes the delivery vehicle. ABC Corporation's incremental borrowing rate is 10, and the Lessor's implicit rate is unknown. No entries have yet been made concering this lease arrangement. After determining the type of lense arrangement financmg or operating), prepare the necessary multiple-part joum entry for 2014 for ABC Corporation Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for 100 this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity 101 102 103 15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pensa plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan is Note Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entet 97 98 99 104 105 106 107 105 the delivery vehicle. ABC Corporations incremental bottowing cate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. Aftet determining the type of lease accangement (financug or operating), prepare the necessary multiple-part journal 9 enter for 2014 for ABC Corporation. (Hunts: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for 30 this lease transaction. Also for Statement of Cash Flow purposes, the principal portion of lense payments are comtectlr categorized as a financing activity) 01 02 103 15 ABC Corporation provides a defned benefit pension plan for its emplovees. A combination adjusting entry should be made to correctly account for this type of pention 104 plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contabution to the pension plan in 2014 Note: Use the mmmary entey method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting enter 106 107 Pension antet/hability (January 1) SO 108 Actual tetum on planets $40,000 109 Expected return on plan assets $20,000 110 Contributions (founding in 2014 $37,000 111 Fair valse of plan assets ember 31) $75,000 112 Settlement rate 10% 113 Projected benefit obligation (Jamuary 1) SO 114 Service cost $60,000 115 Benefits paid in 2014 SO 116 *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Leability as long-term in nature. 117 118 16 On December 31, 2014, ABC Corporation med 1,000 shares of restacted stock to its clef Funancial Office ABC stock had a fair value (closing market price) of $10 per shate on December 31, 2014. Additional information is as follows 120 a. The service period related to the restricted stock is 2 years 121 b. Vesting out if the CFO stay with the company for two-year period 122 par value of the common stock $3 per share 123 Make the appropriate accounting entry as of the grant date, 12/31/14. Note me the alternative method as descobed in ou textbook for defected compensation 124 125 Do the step after preparing the Incow Statwwwxwer for the Increw lawrlws (low wwd to calware I Before Iwan Tzu i order to enwalte totale Tax Exu) 126 17 Corporate taxes are due in four estimated quarter payments on April 15. June 15, September 15, and December 15. 127 However, for the purposes of this ABC station, we will assume that estimates are not paid, and that the tax is paid in full 128 on the return's March 15, 2015 due date 129 ABC's income tax rate is 40%. The entire yest's come tax expense was estimated at the beginning of 2014 to be $69,600, 130 10 Jamry through November income tax expense recognized amount to $63,800 (11/12 months). 131 Since we are amming estimates are not made during the year, the balance in Income taxes payable represents 132 tax cemed for January through November Amme no defeered tax antets or deferred tax liabilities 133 Based on the income before income taxes figure from the come statement, record December's income tax expense 134 so that the entire rear's total tax expense is correct 135 136 137 138 139 119 c. The +