Use the following to answer questions 1 4

A company maintains its records using cash basis accounting; however, their bank wants to see their accrual basis income statement. For simplicity, we assume only one expense account (salaries). The following is data gathered from their records.

Cash received from customers	$584,700
Cash paid for salaries	212,500
Accounts receivable (beginning balance)	50,000
Accounts receivable (ending balance)	35,000
Salaries payable (beginning balance)	5,000
Salaries payable (ending balance)	7,500

First, create T-accounts for ACCOUNTS RECEIVABLE and SALARIES PAYABLE and input the beginning and ending amounts to help answer questions #1 &2. NOTE: All sales are on account and salaries are recorded before they are paid.

Determine the amount of revenue earned during the year: $__________

Determine the amount for salaries expense for the year: $___________

Determine accrual basis net income: $______________

Determine cash basis net income: $_____________

Use the following to answer questions 5 6

Following is a February transaction for a company. Calculate the amount of expense to recognize in February.

In February the company paid their employees $2,500; $2,000 for work performed in February and $500 for work performed in January.

Accrual basis expense: $____________

Cash basis expense: $______________

Use the following to answer 7 8

Following is a February transaction for a company. Calculate the amount of revenue to recognize in February.

In February the company performed $98,500 of service and they billed their customers. Customers paid 90,000 this month and will pay $8,500 next month.

Accrual basis revenue: $___________

Cash basis revenue: $_____________

Use the following to answer questions 9 - 10

On December 1^st, the company received a $20,000 payment from a customer for services to be rendered evenly over the next four months. Deferred Revenue was credited on December 1^st and no other entries regarding this transaction were made until December 31st.

$__________ After the adjusting entry has been recorded on December 31^st, determine the ending balance in the deferred revenue account that should be recorded on the December 31^st Balance Sheet.

$_________ After the adjusting entry has been recorded on December 31^st, determine the amount of service revenue that should be recognized for this customer on the annual income statement on December 31st.

Use the following to answer questions 11 12

On October 1^st the company borrows $500,000 from a local bank for nine months. A note is signed with principal and 6% interest to be paid when the note matures next year. A note payable was recognized on October 1^st and no other entries regarding this transaction were made until December 31st.

$__________ In the adjusting entry recorded on December 31^st determine the amount of interest expense that should be reported.

What effect would failure to record the adjusting entry for this note payable have on the financial statement items?

A. would cause it to be overstated

B. would cause it to be understated

C. would have no effect

Assets	Liabilities	Stockholders Equity	Revenue	Expenses	Net income

Use the following to answer questions 13 14

Record the adjusting entry at December 31 year-end. No adjusting entries were made during the year. Employee salaries for the month of December totaling $24,000 will be paid on January 5, 2014. The adjusting entry on December 31st is:

Account	Debit	Credit

$_________Indicate by how much net income in the income statement is higher or lower if the adjustment in #13 is not recorded (if lower put in front of your answer).

Use the following to answer questions 15 - 16

Record the adjusting entry at December 31 year-end. No adjusting entries were made during the year. On December 1, 2013, the company pays a local radio station $30,000 for 120 radio ads that were to be aired, 20 per month, throughout December, January, February, March, April and May. Prepaid Advertising was debited on December 1st. The adjusting entry on December 31^st is:

Account	Debit	Credit

$__________ What is the balance in Prepaid Advertising after the adjusting entry?

Use the following transactions to answer questions 17 19

Determine the amount of revenue or expense that would be reported at the time of the transaction under the two methods. An example transaction has been completed for you.

Example: Purchased office supplies for cash, $440

Transaction			Accrual-basis		Cash-basis
			Revenue	Expense	Revenue	Expense
example		Purchased office supplies for cash, $440 (no accrued expense, hasnt been used yetcash flowed for the operating cost so its a cash expense)	$0	$0	$0	$440
17.	Record depreciation of building $12,000
18.	Borrowed $75,000 from the bank
19.	Pay workers $18,000 for the month

Use the following to answer questions 20 26

The following account balances appear in the 20C year end adjusted trial balance of CAT Corporation:

Cash	$16,500
Accounts Receivable	24,100
Supplies	100
Equipment	165,000
Accumulated depreciation	22,400
Accounts payable	10,700
Notes payable	40,000
Common stock	45,000
Retained earnings	69,000
Dividends	7,500
Service revenue	207,500
Salaries expense	165,000
Supplies expense	900
Rent expense	11,000
Depreciation expense	4,000
Miscellaneous expense	500

20. $___________Determine total expenses for the year

21. $___________Determine net income for the year

22. $___________ Determine ending retained earnings for the year

23. $___________ Determine ending total stockholders equity for the year

24. $___________Determine total Current Assets at the end of the year

25. $___________Determine Total Assets at the end of the year

26. Should Common stock be closed at year end?

Use the following to answer questions 27 29

J&C, Inc., had the following Net Income (Loss) from 2010 2013. Determine their Ending Retained Earnings amount for each year.

K&L, Inc. (In Millions)
Year		Net Income (Loss)	Dividends	Ending Retained Earnings
	2010	$10.50	$5.50	$33.65
27.	2011	$6.75	$4.95
28.	2012	($0.20)	$3.25
29.	2013	$8.25	$6.15

Use the following to answer questions 30 33

The following account balances appear in the 20C year end POST-closing trial balance of TRN Corporation:

Cash	$65,000
Accounts Receivable	55,000
Inventory	98,500
Equipment	284,200
Accumulated Depreciation	27,500
Accounts Payable	41,300
Notes Payable	125,000
Common stock	125,000
Retained earnings	?

30. $___________Determine the total amount of debits that would be shown on the post closing trial balance

31. $___________Determine retained earnings that would be shown on the post closing trial balance

32. $___________Determine total current assets

33. $___________ Determine total Stockholders EquityUse the following to answer questions 34 - 39

The year-end adjusted trial balance of JOB Corporation included the following account balances:

Retained earnings	$98,100
Service revenue	378,500
Salaries expense	255,600
Rent expense	24,000
Interest expense	6,500
Dividends	65,000

Prepare the closing entries to Income Summary and Retained Earnings.

34. $________In preparing the closing entries, how much should Income Summary be credited?

35. $________In preparing the closing entries, how much should Income Summary be debited?

36. $________In preparing the closing entries, how much should Retained Earnings be credited?

37. $________In preparing the closing entries, how much should Retained Earnings be debited?

38. $_________After closing the accounts, what is the ending balance in Retained Earnings?

39. $_________After closing the accounts, what is the ending balance in the Dividends account?