Reference no: EM13859224

Question 1:

Journalizing Transactions in Template, Journal Entry Form, and T-Accounts

Creative Designs, a firm providing art services for advertisers, began business on June 1, 2014. The following accounts in its general ledger are needed to record the transactions for June: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Common Stock; Retained Earnings; Service Fees Earned; Rent Expense; Utilities Expense; and Salaries Expense. Record the following transactions for June (a) using the financial statement effects template and (b) in journal entry form. (c) Set up T-accounts for each of the ledger accounts and post the entries to them (key the numbers in T-accounts by date).

June	1	Anne Clem invested cash to begin the business in exchange for common stock.	$12,000
	2	Paid cash for June rent.	950
	3	Purchased office equipment on account.	6,400
	6	Purchased art materials and other supplies costing	3,800
		paid this amount in cash with the remainder due within 30 days.	1,800
	11	Billed clients for services rendered.	4,700
	17	Collected cash from clients on their accounts.	3,250
	19	Paid cash toward the account for office equipment suppliers (see June 3).	3,000
	25	Paid cash for dividends.	900
	30	Paid cash for June utilities.	350

Question 2:

Preparing and Journalizing Adjusting Entries

For each of the following separate situations, prepare the necessary adjustments (a) using the financial statement effects template and (b) in journal entry form.

1. Unrecorded depreciation on equipment is $610.

2. The Supplies account has an unadjusted balance of $2,990. Supplies still available at the end of the period total $1,100.

3. On the date for preparing financial statements, an estimated utilities expense of $390 has been incurred, but no utility bill has yet been received or paid.

4. On the first day of the current period, rent for four periods was paid and recorded as a $2,800 debit to Prepaid Rent and a $2,800 credit to Cash.

5. Nine months ago, Hartford Insurance Company sold a one-year policy to a customer and recorded the receipt of the premium by debiting Cash for $624 and crediting Unearned Premium Revenue for $624. No adjusting entries have been prepared during the nine-month period. Hartford's annual financial statements are now being prepared.

6. At the end of the period, employee wages of $965 have been incurred but not yet paid or recorded.

7. At the end of the period, $300 of interest income has been earned but not yet received or recorded.

(a) Using the financial statement effects template

Question 3:

Analyzing Accounts Using Adjusted Data

Selected T-account balances for Fields Company are shown below as of January 31, 2014; adjusting entries have already been posted. The firm uses a calendar-year accounting period but prepares monthly adjustments.

(a) If the amount in Supplies Expense represents the January 31 adjustment for the supplies used in January, and $620 worth of supplies were purchased during January, what was the January 1 beginning balance of Supplies?

(b) The amount in the Insurance Expense account represents the adjustment made at January 31 for January insurance expense. If the original insurance premium was for one year, what was the amount of the premium and on what date did the insurance policy start?

(c) If we assume that no beginning balance existed in Wages Payable or Wages Expense on January it how much cash was paid as wages during January?

(d) If the truck has a useful life of five years, what is the monthly amount of depreciation expense?

How many months has Fields owned the truck?

Question 4:

Preparing Adjusting and Closing Entries Across Two Periods

Norton Company closes its accounts on December 31 each year. The company works a five-day work week and pays its employees every two weeks. On December 31, 2013, Norton accrued $4,700 of salaries payable. On January 7, 2014, the company paid salaries of $12,000 cash to employees.

Prepare journal entries to:

a. Accrue the salaries payable on December 31:

(b) Close the Salaries Expense account on December 31 (the account has a year-end balance of $250,000 after adjustments).

(c) Record the salary payment on January 7.

Preparing Financial Statements and Closing Procedures

Solomon Corporation's adjusted trial balance for the year ending December 31, 2013, is:

Solomon Corporation
Adjusted Trial Balance
December 31, 2013

	Debit	Credit
Cash Accounts Receivable Equipment	$4,000 6,500 78,000
Accumulated Depreciation		$14,000
Notes Payable		10,000
Common Stock		43,000
Retained Earnings		12,600
Service Fees Earned		71,000
Rent Expense	18,000
Salaries Expense	37,100
Depreciation Expense	7,000
Totals	5150,600	$150,600

(a) Prepare its income statement and statement of stockholders' equity for the current year, and its balance sheet for the current year-end. Cash dividends were $8,000 and there were no stock issuances or repurchases.

For the income statement, enter credit balances as positive numbers and debit balances as negative balances.

Preparing an Unadjusted Trial Balance and Adjustments

Snapshot Company, a commercial photography studio, has just completed its first full year of operations on December 31, 2013. General ledger account balances before year-end adjustments follow; no adjusting entries have been made to the accounts at any time during the year. Assume that all balances are normal.

Cash                          $2,150 Accounts Payable               $1,910

Accounts Receivable 3,800 Unearned Photography Fees 2,600
Prepaid Rent        12,600 Common Stock        24,000

Prepaid Insurance         2,970 Photography Fees Earned   34,480

Supplies                     4,250 Wages Expense                   11,000

Equipment                  22,800 Utilities Expense                  3,420

An analysis of the firm's records discloses the following.

1. Photography services of $925 have been rendered, but customers have not yet paid or been billed. The firm uses the account Fees Receivable to reflect amounts due but not yet billed.

2. Equipment, purchased January 1, 2013, has an estimated life of 10 years.

3. Utilities expense for December is estimated to be $400, but the bill will not arrive or be paid until January of next year.

4. The balance in Prepaid Rent represents the amount paid on January 1, 2013, for a 2-year lease on the studio.

5. In November, customers paid $2,600 cash in advance for photos to be taken for the holiday season. When received, these fees were credited to Unearned Photography Fees. By December 31, all of these fees are earned.

6. A 3-year insurance premium paid on January 1, 2013, was debited to Prepaid Insurance.

7. Supplies available at December 31 are $1,520.

8. At December 31, wages expense of $375 has been incurred but not paid or recorded.

(a) Prove that debits equal credits for SnapShot's unadjusted account balances by preparing its unadjusted trial balance at December 31, 2013.

Question 5:

Analyzing Transactions Using the Financial Statement Effects Template and Preparing Financial Statements Schrand Aerobics, Inc., rents studio space (including a sound system) and specializes in offering aerobics classes. On January 1, 2013, its beginning account balances are as follows: Cash, $5,000; Accounts Receivable, $5,200; Equipment, $0; Notes Payable, $2,500; Accounts Payable, $1,000; Common Stock, $5,500; Retained Earnings, $1,200; Services Revenue, $0; Rent Expense, $0; Advertising Expense, $0; Wages Expense, $0; Utilities Expense, $0; Interest Expense, $0.
The following transactions occurred during January.
Required
(1) Paid $600 cash toward accounts payable
(2) Paid $3,600 cash for January rent
(3) Billed clients $11,500 for January classes
(4) Received $500 invoice from supplier for T-shirts given to January class members as an advertising promotion
(5) Collected $10,000 cash from clients previously billed for services rendered
(6) Paid $2,400 cash for employee wages
(7) Received $680 invoice for January utilities expense
(8) Paid $20 cash to bank as January interest on notes payable
(9) Declared and paid $900 cash dividend to stockholders
(10) Paid $4,000 cash on January 31 to purchase sound equipment to replace the rental system

(a) Using the financial statements effects template, enter January 1 beginning amounts in the appropriate columns of the first row. (Hint: Beginning balances for columns can include amounts from more than one account.)

(b) Report the effects for each of the separate transactions 1 through 10 in the financial statement effects template set up in part (a). Total all columns and prove that (1) assets equal liabilities plus equity at January 31, and (2) revenues less expenses equal net income for January.

(c) Prepare its income statement for January 2013.

(d) Prepare its statement of stockholders' equity for January 2013.

(e) Prepare its balance sheet at January 31, 2013.

Question 6:

Recording Transactions Using Journal Entries and T-Accounts
(1) Receive €50,000 in exchange for common stock.
(2) Borrow €10,000 from bank.
(3) Purchase €2,000 of supplies inventory on credit.
(4) Receive €15,000 cash from customers for services provided.
(5) Pay €2,000 cash to supplier in transaction 3.
(6) Receive order for future services with €3,500 advance payment.
(7) Pay €5,000 cash dividend to shareholders.
(8) Pay employees €6,000 cash for compensation earned.
(9) Pay €500 cash for interest on loan in transaction 2.

a. Prepare journal entries for each of the transaction (1) through (9).

b. Set up T-accounts for each of the accounts used in part a. and post the journal entries to the appropriate line in the correct T-accounts. (The T-accounts will not have opening balances.)