Part 1

cash

SCF class

investmts

accounts receivable

inventory

operating assets (net)

=

accounts payable

income taxes pay

debt currently due

salaries & wages payable

interest payable

long term debt

+

paid in capital

retained earnings

explaination of change in retained earnings

B/S 12/31/12

70,000

0

150,000

350,000

360,000

80,000

0

0

60,000

20,000

400,000

150,000

220,000

a.

1,300,000

1,300,000

b.

2,100,000

2,100,000

revenue earned

(1,250,000)

(1,250,000)

cost of goods sold

c.

2,050,000

(2,050,000)

d.

(1,130,000)

(1,130,000)

e.

(640,000)

(60,000)

(580,000)

salary & wage exp.

f.

(22,000)

(22,000)

income taxes

g.

(40,000)

(20,000)

(20,000)

interest exp

h.

(37,500)

(375,000)

not on incme state

i.

j.

(40,000)

(40,000)

Depreciation exp

k.

l.

70,000

(70,000)

salary & wage exp

m.

debt reclass.

B/S 12/31/13

Part 2

cash

SCF class

Prepaid Insurance

=

unearned rent revenue

sales com payable

+

paid in capital

retained earnings

explaination of change in retained earnings

2. 6/01/2013

3.adjustment

1.in fin stmts

2. 11/1/2013

3.adjustment

1. in fin stmts

2. no entry

3.adjustment

1. in fin stmts

SPECIFIC TRANSACTIONS AND EVENTS

i. On 12/31/13 Behrend purchased 1,000 shares of IBM stock to be held as a short-term investment for a total cash payment of $100,000.

ADJUSTING ENTRIES

k. Recognize interest expense incurred but not paid on outstanding debt.

m. The actual amount of income tax due for 2013 is 20% of reported income before tax per the income statement. Make the appropriate adjustment by comparing the actual tax due (must be calculated) vs. the $22,000 estimated tax paid (in transaction f) by recognizing a current asset tax refund receivable or a current liability taxes due, depending upon whether there was overpayment or underpayment of tax for 2013.

Part 2:

For each situation, provide the necessary year-end (12/31/13) adjusting entry in accounting equation format for Doran Corp.

On 6/1/13 Doran paid $1,200 for a one year fire insurance policy covering the period 6/1/13-5/31/14. The full amount was initially recorded as prepaid insurance.

On 11/1/13 Doran received $6,000 from a tenant that rents some vacant office space. The rent payment was for the three month period 11/1/13-1/31/14. Doran initially recorded the full amount as rent revenue.

Doran pays a 3% sales commission on all sales. Commissions are paid to salesmen in the month following the month of revenue recognition. The 2013 income statement will include December 2013 sales of $50,000. No entry has been made related to the $1,500 in sales commissions that will be paid in January 2014.