Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1 (10 marks) Ace Accountings controller, John Ace, hired an assistant, Annette Black. While guiding her in financial statement preparations, John Ace encountered opposition

Question 1

(10 marks)

Ace Accountings controller, John Ace, hired an assistant, Annette Black. While guiding her in financial statement preparations, John Ace encountered opposition from Annette Black. She disagreed with making an adjusting journal entry at December 31 year end to accrue staff bonuses, as the bonuses were not paid. She wanted to wait until the staff bonuses were paid in February to record the bonuses. Her reasoning was that the results would be identical.

Required:

Write a business memo to explain to Annette Black why the adjusting journal entry to accrue the staff bonuses is or is not required.

The format of the business memo should be the following:

DATE: (fill in)

TO: (fill in)

FROM: (fill in)

SUBJECT: Why the adjusting journal entry for staff bonuses is or is not required

Question 2

(10 marks)

Janes Technically Correct, a proprietorship, had a December 31 year end.

Required:

Record the initial and subsequent transaction for each of the following independent situations using the numerals to group the transaction:

  1. June 01: Janes Technically Correct received $ 24,000 for a 12-month service contract.

December 31: A year-end adjusting journal entry is required to update the balance.

  1. January 13: Janes Technically Correct did $ 10,000 software updates for a client. Payment will be received at the end of February.

February 28: A journal entry is required to record receipt of payment.

  1. November 01: Janes Technically Correct purchased $ 7,000 office supplies on account.

December 31: Jane counted the office supplies and noted that there was $ 6,000 supplies on hand. Thus, the balance needs to be updated.

  1. May 01: Because of additional job contracts, Janes Technically Correct leased a computer for $900, which represented a 5-month rental contract.

October 01: Janes Technically Correct needs to adjust the prepaid account.

Question 3

(50 marks)

Bobs Best Ads, a proprietorship created by Bob Best, did consulting work relating to commercials for television and ads for newspapers. Bobs Best Ads prepared the following financial statement:

Bobs Best Ads

Unadjusted Trial Balance

December 01, 2018

ACCOUNT

DEBIT

CREDIT

Cash

$ 32,000

Accounts Receivable

30,000

Supplies

4,000

Prepaid Advertising

20,000

Computer Equipment

60,000

Accumulated Amortization, Computer Equipment

$ 0

Furniture

100,000

Accumulated Amortization, Furniture

0

Accounts Payable

40,000

Salaries Payable

8,000

Unearned Revenue

15,000

Bob Best, Capital

130,000

Bob Best, Withdrawals

50,000

Consulting Revenue

286,000

Advertising Expense

70,000

Entertainment Expense

23,000

Salaries Expense

90,000

Total

$ 479,000

$ 479,000

In December 2018, the following transactions occurred:

  1. December 01: Bobs Best Ads paid $ 50,000 cash for a television ad, which promotes the great work that Bobs Best Ads can do for its clients. It will air on television in February 01, 2019.
  2. December 05: Bob Best withdrew $ 20,000 cash from his personal bank account, to purchase a watch for his dads birthday.
  3. December 10: Bobs Best Ads purchased $ 3,000 supplies on account.
  4. December 12: A client gave Bobs Best Ads a cheque for $ 25,000 for work to be done in March 2019.
  5. December 15: Bobs Best Ads provided $ 13,000 consulting services for a client; the client will pay Bobs Best Ads in March 2019.
  6. December 31: Bob Best did a physical count of office supplies, and he determined that $ 5,000 was on hand.
  7. The computer equipment, purchased on January 02, 2018, was expected to last 5 years. The computer equipment had no residual value after 5 years. Bobs Best Ads used the straight-line method of amortization.
  8. The furniture, purchased on January 02, 2018, was expected to last 10 years; it had no expected value after 10 years. Bobs Best Ads used the straight-line method of amortization.
  9. Bob Best received a year-end bonus of $ 9,000, which will be paid in March 2019.

Required:

  1. Journalize the above transactions affecting Bobs Best Ads. Provide a written explanation for each journal entry recorded or not recorded.
  2. Prepare a December 31, 2018 adjusted trial balance for Bobs Best Ads. Record the expenses in alphabetical order.
  3. Prepare a December 31, 2018 income statement for Bobs Best Ads.
  4. Prepare a December 31, 2018 statement of owners equity for Bobs Best Ads. Assume that there have been no changes to the capital account since January 01, 2018.
  5. Prepare a December 31, 2018 balance sheet for Bobs Best Ads.

Question 4

(30 marks)

Golden Designs incurred the following 2018 transactions:

  • November 01: Paid $ 60,000 to place an ad for 4 months on the internet.
  • December 01: Received $ 100,000 cash payment to produce a monthly coin for the next 5 months.

Required:

  1. Open T-accounts for Prepaid Advertising, Advertising Expense, Unearned Revenue, and Revenue.
  2. Prepare a journal entry that would debit an asset account, Prepaid Advertising. Prepare a journal entry that would credit a liability account, Unearned Revenue. No explanations are needed.
  3. Prepare journal entries to record the December 31, 2018 adjustments.
  4. Post the journal entries to the T-accounts. No posting references are needed. Show the December 31, 2018 balances on the T-accounts.
  5. Repeat requirements A through D above. This time, instead of debiting Prepaid Advertising, debit Advertising Expense. This time, instead of crediting Unearned Revenue, credit Revenue.

By comparing the balances in requirem

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Pioneers Of A Profession Chartered Accountants To 1879

Authors: Jas. C. Stewart

1st Edition

0367532557, 9780367532550

More Books

Students also viewed these Accounting questions

Question

Does this value make me feel good about myself?

Answered: 1 week ago