Question
Question 2 (10 marks) Following is a selection of independent transactions for Jupiter Co.: a.Performed services on account, $18,500 b.Paid $2,000 dividend to shareholders c.Issued
Question 2 (10 marks)
Following is a selection of independent transactions for Jupiter Co.:
a.Performed services on account, $18,500
b.Paid $2,000 dividend to shareholders
c.Issued common shares to investors in exchange for $60,000 cash
d.The company amortized 1 year of a 3-year insurance policy. The policy was purchased 2 years ago for $36,000 cash.
e.Paid salaries of $3,500 for the current month.
f.The company purchased a vehicle costing $40,000, paying $10,000 cash and signing a 1-year, 10% note for the balance.
Required
Identify the dollar effect and the direction (+ = Increase; - = Decrease; NE = No Effect) for each of the transactions (b) to (f) on the accounting equation, by completing the table below.
Note that the sign must be included to indicate if the amount is positive or negative and if there is no effect, "NE"must be included.Item (a) is done as an example below.
Item
Assets
Liabilities
Owners' Equity
Net Income
a. (example)
+18,500
NE
+18,500
+18,500
b
c
d
e
f
Question 3 (16 marks)
The following trial balance was taken from the books of Venus Corporation at December 31, 2020:
AccountDebitCredit
Cash........................................................................................................... $40,000
Accounts Receivable.................................................................................... 106,000
Prepaid Rent ............................................................................................... 12,800
Note Receivable................................................................................................ 8,000
Merchandise Inventory................................................................................... 54,000
Unexpired Insurance......................................................................................... 4,800
Furniture and Equipment.............................................................................. 138,000
Accumulated Depreciation........................................................................................ 15,000
Accounts Payable....................................................................................................... 12,600
Common Shares......................................................................................................... 44,000
Retained Earnings...................................................................................................... 65,000
Sales........................................................................................................................... 410,000
Cost of Goods Sold....................................................................................... 128,000
Salaries Expense............................................................................................. 53,000
Totals.................................................................................................. $ 546,600$ 546,600
At year end, the following items have not yet been recorded.
1.Insurance expired during the year, $ 2,000.
2.Depreciation on furniture and equipment, 10% of the cost per year.
3.Interest at 9% is receivable on the note for one full year.
4.Prepaid rent used up during the year, $6,000.
5.Accrued salaries at December 31, $6,200.
Instructions
a) Prepare in good form the necessary adjusting entries, adding any new accounts which you may need. Narratives (explanations) are not required for journal entries. (10 marks)
Question 3 (continued)
b) Prepare the necessary closing entries. (6 marks)
Question#4 ( 20 marks)
The assets and liabilities of Hercules Inc. as of December 31,2019, and revenues and expenses for the year ended on that date follow:
Land$98,000
Property tax expense$5,000
Note payable (due 2025)95,000
Accounts receivable25,000
Accounts payable21,000
Advertising expense10,000
Rent expense3,000
Building140,000
Cash10,000
Salary expense85,000
Common shares75,000
Salary payable12,000
Furniture20,000
Service revenue200,000
Interest expense4,000
Supplies3,000
Beginning retained earnings were $50,000, and dividends totalled $50,000 for the year.
Required
1.Prepare in good form a statement of earnings (income statement) of Hercules Inc. for the year ended December 31, 2019. (6 marks)
Question#4 (continued)
2.Prepare in good form a statement of retained earnings of Hercules Inc.for the year ended December 31, 2019. (3 marks)
3.Calculate the following amounts for Hercules at December 31, 2019 (8 marks):
CurrentAssets :____________________________________________________________
TotalAssets:________________________________________________________________
TotalLiabilities:_____________________________________________________________
TotalShareholders' equity:___________________________________________________
4.Analyze Hercules Inc.by answering these questions (3marks):
a.Was Hercules Inc. profitable during 2019?By howmuch?______________________________________________________________
______________________________________________________________________
b.Who owns more of Hercules Inc.'s assets, the creditors or the shareholders? Why?________________________________________________________________
_____________________________________________________________________
Question5 (9 marks)
Aunt Athena's Catering Service provides catering service for special occasions.During 2019, Aunt Athena performed $140,500 of catering services and collected $110,300 of cash from customers. Salaries earned by Aunt Athena's employees during 2019 were $40,000. Aunt Athena paid employees $36,500 during 2019. Aunt Athena had $1,300 of supplies on hand at the beginning of the year and purchased and paid for an additional $7,000 of supplies during the year. Supplies on hand at the end of 2019 were $1,700. Other selling and administrative expenses incurred and paid for during 2019 were $5,500.
Required:
1)Calculate Aunt Athena's amount of accrual and cash-basis income for 2019 by completing the table below (7 marks).
ACCRUAL BASIS
CASH BASIS
Revenues:
Catering services
Less Expenses:
Salaries
Supplies
Other administrative and selling
Net Income
2)Which basis (cash or accrual) reflects more accurately the performance of Aunt Athena's business? Briefly explain why. (2 marks)
__________________________________________________________________________
___________________________________________________________________________
Question #6(13 marks )
Saturn Company deposits all receipts daily and makes all payments by cheque. The following information is available from the cash records of Saturn in the month of April, its first month of operations:
Month of April Results
Per BankPer Books
Balance April 30........................................................... $42,000$42,140
April deposits recorded................................................. 11,20017,300
April cheques recorded................................................. 12,01014,320
Items on bank statement but not in books:
Note collected by bank.................................................. 5,500-0-
Bank service charge...................................................... 50-0-
Customer's NSF cheque returned by the bank............. 1,800-0-
Instructions
a)Calculate the amount of the April 30:
1.Deposits in transit (2 marks)
2.Outstanding cheques. (2 marks)
Deposits in transit:______________________________________________
Outstanding cheques:_______________________________________________
b)What is the April 30 adjusted cash balance for Saturn? Show all work. (4 marks)
Question #6(continued)
c)Prepare ny necessary journal entries by Saturn.(5 marks)
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