Question 1

On July 1, 2020, Bright Mountains Publishing sells $80,000 of two-year magazine subscriptions in advance.

- What entry does Bright Mountains makes when it receives the cash on 7/1/2020?

- What adjusting entry does Bright Mountains makes on 12/31/2020?

- How should Bright Mountains record the remaining liability on the balance sheet on 12/31/2020?

Question 2

Tax Suck Company operates in Lehigh County (LC). LC has a fiscal year-end of September 30. Property taxes become a lien against the property on October 1 of each year. Tax Suck estimated its property taxes for the period October 1, 2019, to September 30, 2020, to be $7,200 million. The Company received a tax bill for $7,290 million from LC and paid the entire bill on January 1, 2020.

Tax Suck accounting period runs from January 1 to December 31 each year.

Prepare journal entries to record the monthly accruals prior to the tax payments

Prepare an adjusting entry at the date of tax payments

Prepare journal entries to record the monthly tax expense after the January 1 tax payment

Question 3

ABC Co. sells computers for $5,000, and provides a two-year warranty on its products, in case the products must be repaired. During December 2016, ABC sold 200 computers and recorded sales revenue of $1,000,000. At the end of 2016, ABC recorded the estimated warranty costs related to these sales. Based on past experience and warranty records, ABC estimates that the repair costs it will incur are 3% of sales. During December, 2016, ABC also incurred actual warranty costs on previously sold computers, of $45,000.

(A) Provide the entry to record the estimated warranty liability.

(B) Provide the entry to record the costs incurred.

(C) If ABCs Estimated Warranty Liability had a balance of $200,000 at 12/1/2016, what was the balance in the account at 12/31/2016?