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Chapter 3: Q7E (page 132)

E3-7 (L03) (Analyze Adjusted Data) A partial adjusted trial balance of Piper Company at January 31, 2017, shows the following.

PIPER COMPANY

ADJUSTED TRIAL BALANCEJANUARY 31, 2017

Debit (\() Credit(\))Supplies \( 700Prepaid Insurance 2,400Salaries and Wages Payable \) 800UnearnedService Revenue 750Supplies Expense 950Insurance Expense 400Salaries and Wages Expense 1,800Service Revenue 2,000

InstructionsAnswer the following questions, assuming the year begins January 1.(a) If the amount in Supplies Expense is the January 31 adjusting entry, and \(850 of supplies was purchased in January,what was the balance in Supplies on January 1?(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for oneyear, what was the total premium and when was the policy purchased?(c) If \)2,500 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2016?(d) If $1,600 was received in January for services performed in January, what was the balance in Unearned Service Revenueat December 31, 2016?

Short Answer

Expert verified

(a)Supplies on January 1 are $800

(b) Purchased the premium policy in August 2016.

(c) Salaries and wages payable on December 31, 2016, are $100

(d) Unearned service revenue on December 31 2016, was $350

Step by step solution

01

Meaning of Trial balance

A trial balance means a worksheet that lists all the ending balances of the ledger accounts on their respective debit or credit side.

02

Calculation of Supply balance on January 1

厂耻辫辫濒测鈥塨补濒补苍肠别鈥塉补苍耻补谤测鈥�1鈥�=厂耻辫辫濒测鈥塨补濒补苍肠别鈥塉补苍耻补谤测鈥�31鈥�+厂耻辫辫濒颈别蝉鈥塃虫辫别苍蝉别蝉鈥�鈭�笔耻谤肠丑补蝉别蝉鈥�鈥�=$700+$950鈭�$850=$1650鈭�$850=$800

The supply balance on January 1 is$800

03

Calculation of total insurance purchase

Calculation of insurance expense per year

滨苍蝉耻谤补苍肠别鈥塃虫辫别苍蝉别鈥塸别谤鈥墆别补谤鈥�(罢辞迟补濒鈥塸谤别尘颈耻尘)=滨苍蝉耻谤补苍肠别鈥塃虫辫别苍蝉别鈥塸别谤鈥尘辞苍迟丑脳12=$400脳12=$4800

Calculation of prepaid insurance balance at the beginning of the year

笔谤别辫补颈诲鈥塱苍蝉耻谤补苍肠别鈥塨补濒补苍肠别鈥�(beginning)=笔谤别辫补颈诲鈥塱苍蝉耻谤补苍肠别+滨苍蝉耻谤补苍肠别鈥塸谤别尘颈耻尘=$2,400+$400=$2,800

Calculation of Insurance purchased

滨苍蝉耻谤补苍肠别鈥塸耻谤肠丑补蝉别诲鈥尘辞苍迟丑濒测=鈥�滨苍蝉耻谤补苍肠别鈥塭虫辫别苍蝉别鈥塸别谤鈥墆别补谤鈭�prepaidinsurance(beginning)滨苍蝉耻谤补苍肠别鈥塭虫辫别苍蝉别鈥塸别谤鈥尘辞苍迟丑=$4,800鈭�$2,800$400=5鈥尘辞苍迟丑蝉

Premium purchased for (Total premium) $4800

Premium purchased month is August 2016 (5 months before January which means August, September, October, November and December)

04

Calculation of salaries and wages payable on December 31, 2016

厂补濒补谤颈别蝉鈥塧苍诲鈥墂补驳别蝉鈥塸补测补产濒别鈥塧迟鈥塂别肠别尘产别谤鈥�31,鈥�2016=厂补濒补谤颈别蝉鈥塭虫辫别苍蝉别蝉鈥�+奥补驳别蝉鈥塸补测补产濒别鈭�厂补濒补谤颈别蝉鈥塸补颈诲=$1800+$800鈭�$2500=$2600鈭�$2500=$100

Salaries and wages payable on December 31, 2016, are$100

05

Calculation of unearned service revenue on December 31 2016

鲍苍别补谤苍别诲鈥塻别谤惫颈肠别鈥塺别惫别苍耻别鈥塧迟鈥塂别肠31,2016=颁补蝉丑鈥塺别肠别颈惫别诲鈥�鈭�厂别谤惫颈肠别鈥塺别惫别苍耻别+鲍苍别补谤苍别诲鈥塻别谤惫颈肠别鈥塺别惫别苍耻别辞苍鈥塉补苍鈥�31=$1600鈭�$2000+$750=鈭�$400+$750=$350

Unearned service revenue on December 31 2016, was$350

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Most popular questions from this chapter

What are the characteristics of high-quality information in a company鈥檚 first IFRS financial statements?

List two types of transactions that would receive differentaccountingtreatments using (a) strict cash basis accounting, and (b) a modified cash basis.

A review of the ledger of Baylor Company at December 31, 2017, produces the following data pertaining to the preparation of annual adjusting entries.

  1. Salaries and Wages Payable \(0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive \)700 each per week, and three employees earn \(600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.

  2. Unearned Rent Revenue \)429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a \(5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.

    Date

    Term (in months)

    Monthly Rent

    Number of Leases

    Nov. 1

    6

    \)6,000

    5

    Dec. 1

    6

    \(8,500

    4

  3. Prepaid Advertising \)13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below.

    Contract

    Due date

    Amount

    Number of magazine issue

    A650

    May 1

    \(6,000

    12

    B974

    Oct. 1

    7,200

    24

    The first advertisement runs in the month in which the contract is signed

  4. Notes Payable \)60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1.

    Instructions

    Prepare the adjusting entries at December 31, 2017. (Show all computations).

Kellogg Company has its headquarters in Battle Creek, Michigan. The company manufactures and sells ready-to-eat breakfast cereals and convenience foods including cookies, toaster pastries, and cereal bars.

Selected data from Kellogg Company鈥檚 2014 annual report follows (dollar amounts in millions).

2014

2013

2012

Sales

\(14,580

\)14,792

$14,197

Gross profit %

34.73%

41.26%

38.28%

Operating profit

1,024

2,837

1,562

Net cash flow less capital expenditure

1,211

1,170

1,225

Net earnings

633

1,808

961

In its annual reports, Kellogg Company has indicated that it plans to achieve sustainability of its operating results with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. Kellogg believes its steady earnings growth, strong cash flow, and continued investment during a multi-year period demonstrates the strength and flexibility of its business model.

Instructions

(a) Compute the percentage change in sales, operating profit, net cash flow less capital expenditures, and net earnings from year to year for the years presented.

(b) Evaluate Kellogg鈥檚 performance. Which trend seems most favorable? Which trend seems least favorable? What are the implications of these trends for Kellogg鈥檚 sustainable performance objectives? Explain.

BE3-9 (L03) Prepare the following adjusting entries at August 31 for Walgreens. (a) Interest on notes payable of \(300 is accrued. (b) Services performed but unbilled total \)1,400. (c) Salaries and wages earned by employees of \(700 have not been recorded. (d) Bad debt expense for year is \)900. Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense.
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