Part A: Accrual-Basis Versus Cash-Basis

The following data are taken from the accounting records of Ostrich Company for the year ended December 31, 2030:

Customers billed in 2030 for services provided in 2030480,000Cash collections in 2030 for accounts billed in 2029 24,000Cash collections in 2030 for accounts billed in 2030300,000Supplies at the beginning of 2030 0Cash paid for supplies purchased in 2030 11,000Supplies remaining at the end of 2030 2,700Cash paid for salaries in 2030 14,500Cash paid for annual rent on March 1, 2030 27,000

TO DO:

1. Calculate the amount of revenues and expenses for 2030 under cash-basis accounting.
2. Calculate the amount of revenues and expenses for 2030 under accrual-basis accounting.

Part B: Recording Adjusting Entries

Prepare adjusting journal entries on December 31stas needed for the following items:

(a) The Supplies account shows a balance of $590, but a count of supplies reveals only $220 on hand at year-end. (b) The company initially records the payments of all insurance premiums as Prepaid Insurance. The unadjusted trial balance at year-end shows a balance of $560 in Prepaid Insurance. A review of insurance policies reveals that $110 of insurance is unexpired. (c) Employees work Monday through Friday, and salaries of $3,200 per week are paid each Friday. This year, December 31st falls on a Tuesday. (d) At year-end, the company received a utility bill for December's electricity usage of $290 that will be paid in early January. (e) The company purchased new equipment for $24,000 cash on August 1st of this year. At the time of purchase, the equipment was expected to be used in operations for four years (48 months) and have no resale or scrap value at the end of the four years. The company depreciates the equipment evenly over the 48 months.