Reference no: EM13357507

E1A.Concept . Carlos Company's accountant makes the assumptions or performs the activities listed below. Tell which of the following concepts of accrual accounting, most directly relates to each assumption or action: ( a) periodicity, ( b) continuity, ( c) accrual accounting, ( d) revenue recognition, ( e) deferral, and ( f) accrual. 1. Recognizes the usefulness of financial statements prepared on a monthly basis even though they are based on estimates. 2. Prepares an income statement that shows the revenues earned and the expenses incurred during the accounting period. 3. In estimating the life of a building, assumes that the business will last indefinitely. 4. Postpones the recognition of a one- year insurance policy as an expense by initially recording the expenditure as an asset. 5. Records a sale when the customer is billed. 6. Recognizes, by making an adjusting entry, wages expense that has been incurred but not yet recorded.

E5A, Adjusting Entries for Supplies:Missing Data. Each of the following columns represents a Supplies account: a b c d Supplies on hand at June 1 $ 264 $ 217 $ 196 $ ? Supplies purchased during the month 52 ? 174 1,928 Supplies consumed during the month 194 972 ? 1,632 Supplies on hand at June 30 ?436 56 1,118 1. Determine the amounts indicated by the question marks. 2. Make the adjusting entry for column a, assuming supplies purchased are debited to an asset account.

E7A,Revenue and Expense Recognition. Lacoma Company produces computer software that Kozuch, Inc., sells. Lacoma receives a royalty of 15 percent of sales. Kozuch pays royalties to Lacoma ­semiannually- on May 1 for sales made in July through December of the previous year and on ­November 1 for sales made in January through June of the current year. Royalty expense for Kozuch and royalty income for Lacoma in the amount of $ 12,000 were accrued on December 31, 2013. Cash in the amounts of $ 12,000 and $ 20,000 was paid and received on May 1 and November 1, 2014, respectively. Software sales during the July to December 2014 period totaled $ 300,000. 1. Calculate the amount of royalty expense for Kozuch and royalty income for Lacoma during 2014. 2. Record the adjusting entry that each company made on December 31, 2014.

E9A,Adjusting Entries. Prepare year- end adjusting entries for each of the following: 1. Office Supplies has a balance of $ 168 on January 1. Purchases debited to Office Supplies during the year amount to $ 830. A year- end inventory reveals supplies of $ 570 on hand. 2. Depreciation of office equipment is estimated to be $ 4,260 for the year. 3. Property taxes for six months, estimated at $ 1,750, have accrued but have not been recorded. 4. Unrecorded interest income on U. S. government bonds is $ 1,700. 5. Unearned Revenue has a balance of $ 1,800. Services for $ 600 received in advance have now been performed. 6. Services totaling $ 400 have been performed; the customer has not yet been billed.

Supplement

E1A,Preparation of Closing Entries . Hamilton Realty Company, Inc.' s income statement accounts at the end of its fiscal year, December 31, follow. Hamilton paid dividends of $ 5,000 during the year. Prepare the required closing entries. Account Name Debit Credit Commission Revenue $ 25,620 Wages Expense $ 8,110 Rent Expense 1,200 Supplies Expense 4,260 Insurance Expense 915 Depreciation Expense- Office Equipment 1,345 Total Expenses 15,830 Net Income $ 9,790

 

E2A,Completion of a Work Sheet. A highly simplified alphabetical list of trial balance accounts and their normal balances for the month ended March 31, 2014, follows. Accounts Payable 8 Accounts Receivable 14 Accumulated Depreciation- Office Equipment 2 Cash 8 Common Stock 5 Dividends 12 Office Equipment 16 Prepaid Insurance 4 Retained Earnings 19 Service Revenue 46 Supplies 8 Unearned Revenues 6 Utilities Expense 4 Wages Expense 20

1. Prepare a work sheet, entering the trial balance accounts in the order in which they would normally appear and entering the balances in the correct debit or credit column. 2. Complete the worksheet using the following information: expired insurance, $ 2; estimated depreciation on office equipment, $ 2; accrued wages, $ 2; and unused supplies on hand, $ 2. In addition, $ 4 of the unearned revenues balance had been earned by the end of the month.

More Accounting Problem

P1, Determining Adjustments . At the end of the first three months of operation, Kubose Answering Service, Inc.' s trial balance appears as follows. Kubose has hired an accountant to prepare financial statements to determine how well the company is doing after three months. Upon examining the accounting records, the accountant finds the following items of interest: a. An inventory of office supplies reveals supplies on hand of $ 133. b. The Prepaid Rent account includes the rent for the first three months plus a deposit for April's rent. c. Depreciation on the equipment for the first three months is $ 208. d. The balance of the Unearned Answering Service Revenue account represents a 12- month service contract paid in advance on February 1. e. On March 31, accrued wages total $ 80. f. Federal income taxes for the three months are estimated to be $ 980.

Kubose Answering Service, Inc. Trial Balance March 31, 2014 Cash 3,482 Accounts Receivable 4,236 Office Supplies 903 Prepaid Rent 800 Equipment 4,700 Accounts Payable 2,673 Unearned Answering Service Revenue 888 Common Stock 5,933 Dividends 2,130 Answering Service Revenue 9,002 Wages Expense 1,900 Office Cleaning Expense 345 18,496 18,496

 Required

All adjustments affect one balance sheet account and one income statement account. For each of these situations, show the accounts affected, the amount of the adjustment ( using a + or - to indicate an increase or decrease), and the balance of the account after the adjustment in the following format: Balance Sheet Account Amount of Adjustment (+ or -) Balance After Adjustment Income Statement Account Amount of Adjustment (+ or -) Balance After Adjustment.

P2,Preparing Adjusting Entries. On November 30, the end of the current fiscal year, the following information is available to assist Allerton Corporation's accountants in making adjusting entries: a. Allerton's Supplies account shows a beginning balance of $ 2,350. Purchases during the year were $ 4,218. The end- of- year inventory reveals supplies on hand of $ 1,397. b. The Prepaid Insurance account shows the following on November 30: Beginning balance $ 4,720 July 1 4,200 October 1 7,272 The beginning balance represents the unexpired portion of a one- year policy pur-chased in September of the previous year. The July 1 entry represents a new one- year policy, and the October 1 entry represents additional coverage in the form of a three-year policy. c. The following table contains the cost and annual depreciation for buildings and equipment, all of which Allerton purchased before the current year: Account Cost Annual Depreciation Buildings $ 298,000 $ 16,000 Equipment 374,000 40,000 d. On October 1, the company completed negotiations with a client and accepted an advance of $ 18,600 for services to be performed monthly for a year. The $ 18,600 was credited to Unearned Services Revenue.e. The company calculated that, as of November 30, it had earned $ 7,000 on an $ 11,000 contract that would be completed and billed in January. f. Among the liabilities of the company is a note payable in the amount of $ 300,000. On November 30, the accrued interest on this note amounted to $ 18,000. g. On Saturday, December 2, the company, which is on a six- day work week, will pay its regular employees their weekly wages of $ 15,000. h. On November 29, the company completed negotiations and signed a contract for provide services to a new client at an annual rate of $ 23,000. i. Management estimates income taxes for the year to be $ 22,000.

Required

 1. Prepare adjusting entries for each item listed above. 2. Concept . Explain how the conditions for revenue recognition are applied to transactions e and h.

P4, Determining Adjusting Entries and Tracing Their Effects to Financial Statements. Kitz Limo Service, Inc., was organized to provide limousine service between the airport and various suburban locations. It has just completed its second year of business. Its trial balance follows. Kitz Limo Service, Inc. Trial Balance June 30, 2014 Cash ( 111) 9,812 Accounts Receivable ( 113) 14,227 Prepaid Rent ( 117) 12,000 Prepaid Insurance ( 118) 4,900 Prepaid Maintenance ( 119) 12,000 Spare Parts ( 140) 11,310 Limousines ( 148) 200,000 Accumulated Depreciation- Limousines ( 149) 25,000 Notes Payable ( 211) 45,000 Unearned Passenger Service Revenue ( 212) 30,000 Common Stock ( 311) 30,000 Retained Earnings ( 312) 48,211 Dividends ( 313) 20,000 Passenger Service Revenue ( 411) 428,498 Gas and Oil Expense ( 510) 89,300 Salaries Expense ( 511) 206,360 Advertising Expense ( 513) 26,800 606,709 606,709.

The following information is also available: a. To obtain space at the airport, Kitz paid two years' rent in advance when it began the business. b. An examination of insurance policies reveals that $ 2,800 expired during the year. c. To provide regular maintenance for the vehicles, Kitz deposited $ 12,000 with a local garage. An examination of maintenance invoices reveals charges of $ 10,944 against the deposit. d. An inventory of spare parts shows $ 1,902 on hand. e. Kitz depreciates all of its limousines at the rate of 12.5 percent per year. No limou-sines were purchased during the year. ( Round to the nearest dollar.) f. A payment of $ 1,500 for one full year's interest on notes payable is now due. g. Unearned Passenger Service Revenue on June 30 includes $ 17,815 for tickets that employers purchased for use by their executives but which have not yet been redeemed. h. Federal income taxes for the year are estimated to be $ 13,250.

Required

 1. Determine the adjusting entries and enter them in the general journal ( Page 14). 2. Open ledger accounts for the accounts in the trial balance plus the following: Inter-est Payable ( 213); Income Taxes Payable ( 214); Rent Expense ( 514); Insurance Expense ( 515); Spare Parts Expense ( 516); Depreciation Expense- Limousines ( 517); Maintenance Expense ( 518); Interest Expense ( 519); and Income Taxes Expense ( 520). Record the balance shown in the trial balance.

Supplement

P1, Preparation of Closing Entries. Salinas Trailer Rental, Inc., rents small trailers by the day for local moving jobs. Its adjusted trial balance at the end of the current fiscal year follows. Salinas Trailer Rental, Inc. Adjusted Trial Balance June 30, 2014 Cash 1,384 Accounts Receivable 1,944 Supplies 238 Prepaid Insurance 720 Trailers 24,000 Accumulated Depreciation- Trailers 14,400 Accounts Payable 542 Wages Payable 400 Common Stock 10,000 Retained Earnings 1,388 Dividends 14,400 Trailer Rentals Revenue 91,092 Wages Expense 46,800 Insurance Expense 1,440 Supplies Expense 532 Depreciation Expense- Trailers 4,800 Other Expenses 21,564 117,822 117,822.

Required

 1. From the information given, record closing entries. 2. If closing entries were not prepared at the end of the accounting period, what problems would result in the next accounting period?