ACC 290T Wk 4 – Apply: Homework

QS 3-2 Computing accrual and cash income LO C1

In its first year of operations, Roma Company reports the following.

• Earned revenues of $52,000 ($44,000 cash received from customers).
• Incurred expenses of $29,000 ($22,700 cash paid toward them).
• Prepaid $8,500 cash for costs that will not be expensed until next year.

Compute the company’s first-year net income under both the cash basis and the accrual basis of accounting.

QS 3-5 Prepaid (deferred) expenses adjustments LO P1

For each separate case below, follow the three-step process for adjusting the prepaid asset account at December 31.

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Assume no other adjusting entries are made during the year.

QS 3-6 Prepaid (deferred) expenses adjustments LO P1

For each separate case below, follow the three-step process for adjusting the Supplies asset account at December 31.

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Assume no other adjusting entries are made during the year.

QS 3-7 Adjusting prepaid (deferred) expenses LO P1

For each separate case, record the necessary adjusting entry.

31. On July 1, Lopez Company paid $1,900 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31.
32. Zim Company has a Supplies account balance of $6,400 at the beginning of the year. During the year, it purchased $2,700 of supplies. As of December 31, a physical count of supplies shows $1,150 of supplies available.

Prepare the year-end adjusting entries to reflect expiration of the insurance and correctly report the balance of the Supplies account and the Supplies Expense account as of December 31.

QS 3-8 Accumulated depreciation adjustments LO P1

For each separate case below, follow the three-step process for adjusting the Accumulated Depreciation account at December 31.

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Assume no other adjusting entries are made during the year.

QS 3-10 Unearned (deferred) revenues adjustments LO P2

Record adjusting journal entries for each of the following for year ended December 31.

Assume no other adjusting entries are made during the year.

1. Unearned Rent Revenue.The Krug Company collected $13,200 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months’ rent in advance and occupancy began November 1.
2. Unearned Services Revenue.The company charges $135 per insect treatment. A customer paid $540 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied three treatments for the customer.
3. Unearned Rent Revenue.On September 1, a client paid the company $38,400 cash for six months of rent in advance (the client leased a building and took occupancy immediately). The company recorded the cash as Unearned Rent Revenue.

QS 3-11 Adjusting for unearned (deferred) revenues LO P2

For each separate case below, follow the three-step process for adjusting the unearned revenue liability account at December 31.

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Assume no other adjusting entries are made during the year.

QS 3-14 Accrued revenues adjustments LO P4

Record adjusting journal entries for each of the following for year ended December 31.

Assume no other adjusting entries are made during the year.

1. Accounts Receivable. At year-end, the L. Cole Company has completed services of $28,500 for a client, but the client has not yet been billed for those services.
2. Interest Receivable.At year-end, the company has earned, but not yet recorded, $770 of interest earned from its investments in government bonds.
3. Accounts Receivable.A painting company collects fees when jobs are complete. The work for one customer, whose job was bid at $2,060, has been completed, but the customer has not yet been billed.

Exercise 3-6 Preparing adjusting entries LO P1, P2, P3

1. Depreciation on the company’s equipment for the year is computed to be $11,000.
2. The Prepaid Insurance account had a $7,000 debit balance at December 31 before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,030 of unexpired insurance coverage remains.
3. The Office Supplies account had a $220 debit balance at the beginning of December; and $2,680 of office supplies were purchased in December. The December 31 physical count showed $260 of supplies available.
4. Three-fourths of the work related to $13,000 of cash received in advance was performed this period.
5. The Prepaid Rent account had a $5,800 debit balance at December 31 before adjusting for the costs of any expired coverage. An analysis of rental policies showed that $4,770 of rental coverage had expired.
6. Wage expenses of $3,000 have been incurred but are not paid as of December 31.

Prepare adjusting journal entries for the year ended (date of) December 31 for each of these separate situations.

Exercise 3-7 Preparing adjusting entries LO P1, P3, P4

31. Wages of $12,000 are earned by workers but not paid as of December 31.
32. Depreciation on the company’s equipment for the year is $11,440.
33. The Office Supplies account had a $380 debit balance at the beginning of December. During December, $4,820 of office supplies are purchased. A physical count of supplies at December 31 shows $532 of supplies available.
34. The Prepaid Insurance account had a $5,000 balance at the beginning of December. An analysis of insurance policies shows that $1,900 of unexpired insurance benefits remain at December 31.
35. The company has earned (but not recorded) $950 of interest revenue for the year ended December 31. The interest payment will be received on 10 days after the year-end January 10.
36. The company has a bank loan and has incurred (but not recorded) interest expense of $4,000 for the year ended December 31. The company will pay the interest five days after the year-end on January 5.

For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31.

GL0301 – Based on the… LO A1, P1, P3

The unadjusted trial balance of the Business Mastery Company as of December 31, 2019 is found on the trial balance tab. The following information is required to prepare the necessary adjusting entries for the Business Mastery Company.

• 1) The balance in Prepaid insurance represents a 24-month policy that went into effect on December 1, 2019. Review the unadjusted balance in Prepaid insurance, and prepare the necessary adjusting entry, if any.
• 2) Based on a physical count, supplies on hand total $5,400. Review the unadjusted balance in Supplies, and prepare the necessary adjusting entry, if any.
• 3) The equipment is expected to have a 5-year useful life, and be worth about $11,000 at the end of five years. Review the unadjusted balance in Accumulated depreciation, and prepare the necessary adjusting entry to record the monthly depreciation, if any.
• 4) On December 26, the client paid a $12,000 60-day fee in advance, covering December 27 to February 24. Review the unadjusted balance in Unearned Consulting Revenue, and prepare the necessary adjusting entry, if any.
• 5) Business Mastery’s employee earns $210 per day for a five-day workweek beginning on Monday and ending on Friday. The employee was last paid on Friday, December 26. Review the unadjusted balance in Salaries expense, and prepare the necessary adjusting entry, if any.
• 6) In the second week of December, Business Mastery agreed to provide 30 days of consulting services to a local fitness club for a fixed fee of $5,100. The terms of the initial agreement call for Business Mastery to provide services from December 12, 2019, through January 10, 2020, or 30 days of service. The club agrees to pay Business Mastery $5,100 on January 10, 2020, when the service period is complete. Review the unadjusted balance in Consulting revenue, and prepare the necessary adjusting entry, if any.