K er I and Company, a closely held corporation, invests in commercial rental properties. Krei>er s an, accounting period ends on December 31. At the end of each >ear. numerous adjusting entries must be made because many transactions completed during current and prior years have economic effects on the financial statements of the current and future years. Assume that the current year is 2004.

Required:

This case concerns four transactions that have been selected for your analysis. Answer the questions for each.

TRANSACTION (a): On January 1 , 2002, the company purchased office equipment costing $14,000 for use in the business. The company estimates that the equipment's cost should be allocated at $1,400 annually. 1. Over how many accounting periods will this transaction directly affect Kreiser's financial statements?

Explain. 2. How much depreciation expense was reported on the 2002 and 2003 income statements? 3. How should the office equipment be reported on the 2004 balance sheet? 4. Would Kreiser make an adjusting entry at the end of each year during the life of the equipment?

Explain your answer.

TRANSACTION (b): On September 1, 2004, Kreiser collected $24,000 rent on office space. This amount represented the monthly rent in advance for the six-month period, September 1 , 2004, through February 28, 2005. Unearned Rent Revenue was increased (credited) and Cash was increased (debited)

for $24,000. 1. Over how many accounting periods will this transaction affect Kreiser's financial statements?

Explain. 2. How much rent revenue on this office space should Kreiser report on the 2004 income statement?

Explain. 3. Did this transaction create a liability for Kreiser as of the end of 2004? Explain. If yes, how much? 4. Should Kreiser make an adjusting entry on December 31, 2004? Explain why. If your answer is yes, give the adjusting entry.

TRANSACTION (c): On December 31, 2004, Kreiser owed employees unpaid and unrecorded wages of $7,500 because the employees worked the last three days in December 2004. The next payroll date is January 5, 2005. 1. Over how many accounting periods does this transaction affect Kreiser's financial statements?

Explain. 2. How would this $7,500 affect Kreiser's 2004 income statement and balance sheet? 3. Should Kreiser make an adjusting entry on December 31, 2004? Explain why. If your answer is yes, give the adjusting entry.

TRANSACTION (d): On January 1, 2004, Kreiser agreed to supervise the planning and subdivision of a large tract of land for a customer, L. Todd. This service job that Kreiser will perform involves four separate phases. By December 31, 2004, three phases had been completed to Todd's satisfaction. The remaining phase will be performed during 2005. The total price for the four phases (agreed on in advance by both parties) was $60,000. Each phase involves about the same amount of services. On December 31, 2004, Kreiser had collected no cash for the services already performed. 1. Should Kreiser record any service revenue on this job for 2004? Explain why. If yes, how much? 2. If your answer to part ( 1 ) is yes, should Kreiser make an adjusting entry on December 3 1 , 2004?

If yes, give the entry. Explain. 3. What entry will Kreiser make when it completes the last phase, assuming that the full contract price is collected on the completion date, February 15, 2005?