Part 1. General Concepte: 1. Cash vs. Accrual Accounting: (Estimated time: 8 minutes) Answer the following four questions based on the fact pattern below: Jean is a computer programmer. On June 25th she finished developing a tax software product and began offering it online and in her retail store. On July 2nd, Matt purchased her product online by VISA credit card. VISA card transactions are treated same as receiving cash. Mary visited the retail store on July 10th. She was impressed so she purchased the product that same day but did not pay Jean until August 15th. Answer questions using an actual date: a. Using the cash method, when would Jean record her sale to Mary? b. If Jean uses the accrual method of accounting, when does she record her sale to Mary? c. Under the cash method, when would Jean record Matt's sale? d. If Jean uses the accrual method, when would she record Matrs salo? Part 2. Accounting authorities: (Estimated time: 2 minutes) Enter or circle the correct answer: 1. Are U.S. accounting rules made by FASB or GAAP? 2. Identify international accounting rules: IFRS OR IASB? Jan and Jason decided to form a Delaware corporation named Socrates.com to provide online software training and other services to internet users. The business started up on June 1, 2011. It's unadjusted trial balance for the first month of operation is as follows: Socrates.com Unadjusted Trial Balance June 30, 2016 Account Title DR CR Cash 50,700 Accounts Receivable 1,250 Supplies 2.500 Prepaid Insurance 3,800 Accounts Payable 2,500 Wages Payable Interest Payable Unearned Fees 2.400 Notes Payable 10,000 Common Stk 31 900 FeesEarned 11,250 Total: 58,050 58,050 Instructions: (1) Complete General Ledger (T-Accounts) by recording above Unadjusted Trial Balance amounts for each account title. (2) Complete Adjusting Journal Entries (AE) below for June 30, 2011 for the following transactions: a. Prepaid Insurance policy is a one year policy purchased June 1 b. An inventory count of supplies shows $1,800 on hand at end of month. c.Notes Payable amount is a single promissory note for $10,000 signed June 1. It is a two year note with 6% simple interest payable at maturity. (Note: Interest=Principal x Time x Rate). d. The company discovers fees earned on June 30 In amount of $200 nat booked, billed or collected c. As of June 30, fifty percent (50%) of work has been performed for unearned fees (advances). Accrued Wages wages last paid on June 26 and the next payroll period will not end until July 9. Assume there are four workdays remaining in June and the total payroll for a five day work week is $3,000. (3) Post Ales to the General Ledger and net the amounts. (4) Enter the AJE amounts in the Adjustments columns of the spreadsheet that correspond with their account titles. When completed, Debit column should equal Credit column when totaled. (S) Combine Unadjusted Trial Balance amounts with those in Adjustments columns and enter net amounts in the Adjusted Trial Balance columns of spreadsheet. (6) Spread amounts from Adjusted Trial Balance columns to the Balance Sheet and Income Statement columns, total same, calculate Gain or loss and compete the fin. statements. Enter ADJUSTING JOURNAL ENTRIES below: Date Descrietien DR CR b. d. e f. Socrates.com General Ledger For period ended lune 2016 Accounts Receivable Supplies 1,250 2.500 Cash 50,700 Prepaid Insurance 3,800 Accounts Payable 2,500 Wages Payable Interest Payable Unearned Fees 2,400 Notes Payable 10,000 Prepaid ins. Exp. Common Stock 31,900 Fees Earned Revenue 11,250 Supplies Exp int. Exp Wages ExD Socrates.com End of Period Spreadsheet For the month anded 29.2016 Unad iusted Ideal Balance! Adivstments Adiuusted Taal Bal Income Statement Balance Sheet Cr Rr Cr Dr Cr Dr Cr Rr 50,700 1.250 2.500 3,600 2,5001 Account Titles Cash Accounts Receivable Supplies Prepaid Insurance Accounts Payable Wages Payable Interest Payable Uneamed Fees Notes Payable Common Stock Fees Earned Fees Eamed Prepaid Insurance Em Supplies Exp Interest Exp Wages Exp 2,400! 10,000) 31,900 11,250 Totals: 58,050 58,050 Gain/Less: $31.900 SHAREHOLDERS EQUITY: STOCKHOLDERS EQUITY Common Common Stock Beginning Retained Eaming A Propin Deduct loss Sub tot Less Didends Ending Retained Earnings Total stockholders' equity FINANCIAL STATEMENTS INCOME STATEMENT REVENUE PENSES TotalExpenses: Profit or Loss: BALANCE SHEET ASSETS Total Assets BULUTUS Totalities 310 STOCHOLAS QUITY Common Stock Benin Betained Earning Add Profit Deduct Loss Sub total Less Dividends Endine Retained Eaming Total stockholders Cov Tosellables and stockholdene Amets Unge Stockholderialty