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Chapter 3: Question 4BE (page 128)
BE3-4 (L02,3) Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue.
The amount of service revenue is $2,500.
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E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees \(1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month鈥檚 utility bill. Based on past experience, he estimated the billwould be approximately \)600.3. On August 1, Roddick borrowed \(30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of \)117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.
Vedula Advertising was founded by MuraliVedula in January 2015. On the next page are both the adjusted and unadjusted trial balances as of December 31, 2017.
VEDULA ADVERTISING TRIAL BALANCE DECEMBER 31, 2017 | ||||||
| Unadjusted | Adjusted | |||||
Dr. | Cr. | Dr. | Cr. | |||
Cash | \( 11,000 | \) 11,000 | ||||
Accounts Receivable | 16,000 | 19,500 | ||||
Prepaid Insurance | 9,400 | 6,500 | ||||
Supplies | 3,350 | 1,790 | ||||
Equipment | 60,000 | 60,000 | ||||
Accumulated Depreciation鈥擡quipment | \( 25,000 | \) 30,000 | ||||
Notes Payable | 8,000 | 8,000 | ||||
Accounts Payable | 2,000 | 2,000 | ||||
Interest Payable | 0 | 560 | ||||
Unearned Service Revenue | 5,000 | 3,100 | ||||
Salaries and Wages Payable | 0 | 820 | ||||
Common Stock | 20,000 | 20,000 | ||||
Retained Earnings | 5,500 | 5,500 | ||||
Dividends | 10,000 | 10,000 | ||||
Service Revenue | 57,600 | 63,000 | ||||
Salaries and Wages Expense | 9,000 | 9,820 | ||||
Insurance Expense | 1,560 | |||||
Interest Expense | 560 | |||||
Depreciation Expense | 5,000 | |||||
Supplies Expense | 2,900 | |||||
Rent Expense | 4,350 |
| 4,350 |
| ||
\(123,100 | \)123,100 | \(132,980 | \)132,980 | |||
Instructions
Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker鈥檚 opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker鈥檚 first IFRS financial statements?
(L07) (Cash and Accrual Basis) Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2016, 2017, and 2018
2016 | 2017 | 2018 | |
Cash receipts from sale | |||
On 2016 sales | \(295,000 | \)160,000 | \(30,000 |
On 2017 sales | 0 | \)355,000 | \(90,000 |
On 2018 sales | 0 | 0 | \)408,000 |
Cash payments for expenses: | |||
On 2016 expenses | \(185,000 | \)67,000 | \(25,000 |
On 2017 expenses | \)40,000a | \(160,000 | \)55,000 |
On 2018 expenses | 0 | \(45,000b | \)218,000 |
a Prepayments of 2017 expenses.
b Prepayments of 2018 expenses.
Instructions
(a) Using the data above, prepare abbreviated income statements for the years 2016 and 2017 on the cash basis.
(b) Using the data above, prepare abbreviated income statements for the years 2016 and 2017 on the accrual basis.
(L07) (Cash to Accrual Basis) Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2017, Dr. Accardo collected \(142,000 from her patients and paid \)55,470 in expenses. At January 1, 2017, and December 31, 2017, she had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.)
January 1, 2017, December 31,2017
Account receivable \(9,250 \)15,927
Unearned service revenue \(2,840 \)4,111
Accrued expenses \(3,435 \)2,108
Prepaid expenses \(1,917 \)3,232
Instructions:
Prepare a schedule that converts Dr. Accardo鈥檚 鈥渆xcess of cash collected over cash disbursed鈥� for the year 2017 to net income on an accrual basis for the year 2017.
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