Question
On July 1, 2022,Carla Vista Co.pays $21,500toSandhill Co.for a2-year insurance contract. Both companies have fiscal years ending December 31. Journalize the entry on July 1
On July 1, 2022,Carla Vista Co.pays $21,500toSandhill Co.for a2-year insurance contract. Both companies have fiscal years ending December 31.
Journalize the entry on July 1 and the adjusting entry on December 31 forSandhill Co..Sandhilluses the accounts Unearned Service Revenue and Service Revenue.(Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Post the entry on July 1 and the adjusting entry on December 31 forSandhill Co..(Post entries in the order of journal entries presented in the previous part.)
The trial balance of Woods Company includes the following balance sheet accounts. Identify the accounts that might require adjustment. For each account that requires adjustment, indicate (1) the type of adjusting entry and (2) the related account in the adjusting entry.
Account(1)
Type of Adjustment(2)
Related Accounta.Accounts Receivable.select the type of adjusting entry
Accrued Expenses
Unearned Revenues
Prepaid Expenses
Not Required
Accrued Revenues
select the related account in the adjusting entry
Interest Expense
Not Required
Service Revenue
Insurance Expense
Depreciation Expense
b.Prepaid Insurance.select the type of adjusting entry
Prepaid Expenses
Unearned Revenues
Accrued Revenues
Accrued Expenses
Not Required
select the related account in the adjusting entry
Not Required
Service Revenue
Insurance Expense
Depreciation Expense
Interest Expense
c.Equipment.select the type of adjusting entry
Accrued Expenses
Unearned Revenues
Accrued Revenues
Prepaid Expenses
Not Required
select the related account in the adjusting entry
Insurance Expense
Not Required
Service Revenue
Interest Expense
Depreciation Expense
d.Accumulated DepreciationEquipment.select the type of adjusting entry
Accrued Revenues
Accrued Expenses
Prepaid Expenses
Unearned Revenues
Not Required
select the related account in the adjusting entry
Service Revenue
Depreciation Expense
Insurance Expense
Interest Expense
Not Required
e.Notes Payable.select the type of adjusting entry
Prepaid Expenses
Accrued Expenses
Accrued Revenues
Not Required
Unearned Revenues
select the related account in the adjusting entry
Depreciation Expense
Service Revenue
Insurance Expense
Interest Expense
Not Required
f.Interest Payable.select the type of adjusting entry
Prepaid Expenses
Accrued Expenses
Not Required
Accrued Revenues
Unearned Revenues
select the related account in the adjusting entry
Depreciation Expense
Not Required
Interest Expense
Insurance Expense
Service Revenue
g.Unearned Service Revenue.
The following independent situations require professional judgment for determining when to recognize revenue from the transactions.
Identify when revenue should be recognized in each of the situations.
a.Southwest Airlinessells you an advance-purchase airline ticket in September for your flight home in December.select the period
September
December
October
b.Ultimate Electronicssells you a home theater on a "no money down and full payment in three months" promotional deal.select the period
In one year
At time of delivery
Monthly for 1 year
c.TheToronto Blue Jayssell 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 baseball season runs from April through October.select the period
October
April
Per game basis over the season
d.RBC Financial Grouploans money on August 1. The loan and the interest are repayable in full in November.
select the period
November
Evenly over the loan term
August
e.In August, a customer orders a sweater from theTargetwebsite, paying with a Target credit card. The sweater arrives in September. Target sends a bill in October and receives payment in October.
Identify the accounting concept that describes each situation below. Do not use any concept more than once.
a.Is the rationale for why plant assets are not reported at liquidation value. (Do not use the historical cost principle.)choose the accounting concept
Cost constraint
Monetary unit assumption
Going concern assumption
Historical cost principle
Full disclosure principle
Revenue recognition principle
Periodicity assumption
Economic entity assumption
Materiality
Expense recognition principle
b.Indicates that personal and business recordkeeping should be separately maintained.choose the accounting concept
Expense recognition principle
Revenue recognition principle
Economic entity assumption
Going concern assumption
Materiality
Full disclosure principle
Historical cost principle
Periodicity assumption
Monetary unit assumption
Cost constraint
c.Ensures that all relevant financial information is reported.choose the accounting concept
Monetary unit assumption
Cost constraint
Revenue recognition principle
Materiality
Expense recognition principle
Economic entity assumption
Periodicity assumption
Going concern assumption
Full disclosure principle
Historical cost principle
d.Assumes that the dollar is the "measuring stick" used to report on financial performance.choose the accounting concept
Full disclosure principle
Economic entity assumption
Monetary unit assumption
Expense recognition principle
Materiality
Cost constraint
Historical cost principle
Periodicity assumption
Revenue recognition principle
Going concern assumption
e.Requires that accounting standards be followed for all items ofsignificantsize.choose the accounting concept
Historical cost principle
Expense recognition principle
Full disclosure principle
Revenue recognition principle
Going concern assumption
Monetary unit assumption
Periodicity assumption
Cost constraint
Materiality
Economic entity assumption
f.Separates financial information into time periods for reporting purposes.choose the accounting concept
Materiality
Periodicity assumption
Monetary unit assumption
Revenue recognition principle
Going concern assumption
Expense recognition principle
Full disclosure principle
Cost constraint
Historical cost principle
Economic entity assumption
g.Requires recognition of expenses in the same period as related revenues.choose the accounting concept
Historical cost principle
Materiality
Going concern assumption
Full disclosure principle
Monetary unit assumption
Economic entity assumption
Revenue recognition principle
Expense recognition principle
Cost constraint
Periodicity assumption
h.Indicates that fair value changes subsequent to purchase are not recorded in the accounts.
a.East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain.choose one of the assumption, principle or constraint
Historical cost principle
Revenue recognition principle
No violation
Going concern assumption
Periodicity assumption
Economic entity assumption
b.Hilo Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.)choose one of the assumption, principle or constraint
Going concern assumption
Historical cost principle
No violation
Periodicity assumption
Economic entity assumption
Revenue recognition principle
c.Gomez, Inc. is carrying inventory at its original cost of $100,000. Inventory has a fair value of $110,000.choose one of the assumption, principle or constraint
No violation
Historical cost principle
Periodicity assumption
Economic entity assumption
Revenue recognition principle
Going concern assumption
d.Bly Hospital Supply Corporation reports only current assets and current liabilities on its balance sheet. Equipment and bonds payable are reported as current assets and current liabilities, respectively. Liquidation of the company is unlikely.choose one of the assumption, principle or constraint
Historical cost principle
Revenue recognition principle
Going concern assumption
No violation
Economic entity assumption
Periodicity assumption
e.Chieu Company has inventory on hand that cost $400,000. Chieu reports inventory on its balance sheet at its current fair value of $425,000.choose one of the assumption, principle or constraint
Revenue recognition principle
Periodicity assumption
Historical cost principle
Going concern assumption
No violation
Economic entity assumption
f.Toxy Syles, president of Classic Music Company, bought a computer for her personal use. She paid for the computer by using company funds and debited the "Computers" account.
In its first year of operations,Pharoah Companyrecognized $31,800in service revenue, $6,400of which was on account and still outstanding at year-end. The remaining $25,400was received in cash from customers.
The company incurred operating expenses of $16,600. Of these expenses, $12,730were paid in cash; $3,870was still owed on account at year-end. In addition,Pharoahprepaid $2,390for insurance coverage that would not be used until the second year of operations.
Calculate the first year's net earnings under the cash basis of accounting, and the first year's net earnings under the accrual basis of accounting.
In its first year of operations,Pharoah Companyrecognized $31,800in service revenue, $6,400of which was on account and still outstanding at year-end. The remaining $25,400was received in cash from customers.
The company incurred operating expenses of $16,600. Of these expenses, $12,730were paid in cash; $3,870was still owed on account at year-end. In addition,Pharoahprepaid $2,390for insurance coverage that would not be used until the second year of operations.
Calculate the first year's net earnings under the cash basis of accounting, and the first year's net earnings under the accrual basis of accounting.
Wang Company accumulates the following adjustment data at December 31.
For each item, indicate the (1) type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or understated).(Enter your answers in alphabetical order.)
(1)
Type of Adjustment(2)
Accounts Before Adjustmenta.Services performed but unbilled totals $600.
choose the type of adjustment
Unearned Revenues
Accrued Expenses
Accrued Revenues
Prepaid Expenses
Choose the status of the account
Liabilities Understated
Expenses Overstated
Revenues Understated
Assets Understated
Expenses Understated
Revenues Overstated
Assets Overstated
Liabilities Overstated
Choose the status of the account
Assets Overstated
Expenses Overstated
Revenues Overstated
Liabilities Overstated
Expenses Understated
Assets Understated
Revenues Understated
Liabilities Understated
b.Store supplies of $160 are on hand. The supplies account shows a $1,900 balance.choose the type of adjustment
Accrued Revenues
Accrued Expenses
Unearned Revenues
Prepaid Expenses
Choose the status of the account
Expenses Overstated
Liabilities Overstated
Assets Overstated
Expenses Understated
Liabilities Understated
Assets Understated
Revenues Overstated
Revenues Understated
Choose the status of the account
Revenues Understated
Assets Overstated
Liabilities Understated
Assets Understated
Revenues Overstated
Expenses Understated
Expenses Overstated
Liabilities Overstated
c.Utility expenses of $275 are unpaid.choose the type of adjustment
Accrued Revenues
Accrued Expenses
Prepaid Expenses
Unearned Revenues
Choose the status of the account
Liabilities Overstated
Liabilities Understated
Expenses Overstated
Expenses Understated
Assets Understated
Revenues Overstated
Assets Overstated
Revenues Understated
Choose the status of the account
Liabilities Understated
Revenues Understated
Expenses Understated
Liabilities Overstated
Assets Understated
Revenues Overstated
Expenses Overstated
Assets Overstated
d.Service performed of $490 collected in advance.choose the type of adjustment
Prepaid Expenses
Unearned Revenues
Accrued Revenues
Accrued Expenses
Choose the status of the account
Assets Understated
Expenses Overstated
Expenses Understated
Liabilities Understated
Revenues Overstated
Revenues Understated
Liabilities Overstated
Assets Overstated
Choose the status of the account
Revenues Understated
Expenses Overstated
Liabilities Overstated
Assets Overstated
Liabilities Understated
Assets Understated
Expenses Understated
Revenues Overstated
e.Salaries of $620 are unpaid.choose the type of adjustment
Accrued Expenses
Unearned Revenues
Accrued Revenues
Prepaid Expenses
Choose the status of the account
Liabilities Understated
Assets Overstated
Revenues Understated
Assets Understated
Expenses Overstated
Revenues Overstated
Expenses Understated
Liabilities Overstated
Choose the status of the account
Revenues Understated
Assets Understated
Revenues Overstated
Assets Overstated
Expenses Understated
Liabilities Understated
Liabilities Overstated
Expenses Overstated
f.Prepaid insurance totaling $400 has expired.
The ledger ofMarigold Corp.on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared.
DebitCreditSupplies$2,100Prepaid Insurance2,520Equipment17,500Accumulated DepreciationEquipment$5,880Notes Payable14,000Unearned Rent Revenue8,680Rent Revenue42,000Interest Expense0Salaries and Wages Expense9,800
An analysis of the accounts shows the following.
1.The equipment depreciates $196per month.2.Half of the unearned rent revenue was earned during the quarter.3.Interest of $280is accrued on the notes payable.4.Supplies on hand total $595.5.Insurance expires at the rate of $280per month.
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Cullumber Company, opened an incorporated dental practice on January 1, 2022. During the first month of operations, the following transactions occurred.
1.Performed services for patients who had dental plan insurance. At January 31, $920of such services was completed but not yet billed to the insurance companies.2.Utility expenses incurred but not paid prior to January 31 totaled $610.3.Purchased dental equipment on January 1 for $85,850, paying $28,150in cash and signing a $57,700, 3-year note payable (interest is paid each December 31). The equipment depreciates $550per month. Interest is $690per month.4.Purchased a 1-year malpractice insurance policy on January 1 for $24,000.5.Purchased $2,340of dental supplies (recorded as increase to Supplies). On January 31, determined that $670of supplies were on hand.
Prepare the adjusting entries on January 31. Account titles are Accumulated DepreciationEquipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Accounts Payable.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
CONCORD CORPORATION
Trial Balance
October 31, 2022
DebitCreditCash$15,100Supplies2,690Prepaid Insurance720Equipment4,970Notes Payable$4,970Accounts Payable2,850Unearned Service Revenue1,500Common Stock10,850Retained Earnings0Dividends690Service Revenue9,000Salaries and Wages Expense4,000Rent Expense1,000$29,170
$29,170
Assume the following adjustment data.
1.Supplies on hand at October 31 total $570.2.Expired insurance for the month is $120.3.Depreciation for the month is $135.4.As of October 31, services worth $990related to the previously recorded unearned revenue had been performed.5.Services performed but unbilled (and no receivable has been recorded) at October 31 are $310.6.Interest expense accrued at October 31 is $85.7.Accrued salaries at October 31 are $1,525.
Prepare the adjusting entries for the items above.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
The ledger ofSheffield Corp.on July 31, 2022, includes the selected accounts below before adjusting entries have been prepared.
DebitCreditInvestment in Note Receivable
$18,000Supplies
24,000Prepaid Rent
3,400Buildings
270,000Accumulated DepreciationBuildings
$135,000Unearned Service Revenue
11,000
An analysis of the company's accounts shows the following.
1.The investment in the notes receivable earns interest at a rate of12% per year.
2.Supplies on hand at the end of the month totaled $17,800.
3.The balance in Prepaid Rent represents4months of rent costs.
4.Employees were owed $3,200related to unpaid salaries and wages.
5.Depreciation on buildings is $4,320per year.
6.During the month, the company satisfied obligations worth $4,600related to the Unearned Services Revenue.7.Unpaid maintenance and repairs costs were $2,000.
Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered.Do not indent manually.)
LenStevenstarted his own consulting firm,StevenConsulting, on June 1, 2022. The trial balance at June 30 is as follows.
STEVENCONSULTING
Trial Balance
June 30, 2022DebitCreditCash$6,850Accounts Receivable7,000Supplies1,992Prepaid Insurance3,840Equipment15,000Accounts Payable$4,280Unearned Service Revenue5,200Common Stock21,992Service Revenue8,300Salaries and Wages Expense4,000Rent Expense1,090
$39,772
$39,772
In addition to those accounts listed on the trial balance, the chart of accounts forStevenalso contains the following accounts: Accumulated DepreciationEquipment, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.
Other data:
1.Supplies on hand at June 30 total $720.2.A utility bill for $230has not been recorded and will not be paid until next month.3.The insurance policy is for a year.4.Services were performed for $4,400of unearned service revenue by the end of the month.5.Salaries of $1,290are accrued at June 30.6.The equipment has a 5-year life with no salvage value and is being depreciated at $250per month for 60 months.7.Invoices representing $4,330of services performed byStevenduring the month have not been recorded as of June 30.
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