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Chapter 3: Question 5BE (page 128)
BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years鈥� insurance coverage. Prepare P&G鈥檚 February 1 journal entry and the annual adjusting entry on June 30.
The amount of prepaid insurance used is $150,000.
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E3-1 (L02) (Transaction Analysis鈥擲ervice Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.April 2 Invested \(32,000 cash and equipment valued at \)14,000 in the business.2 Hired an administrative assistant at a salary of \(290 per week payable monthly.3 Purchased supplies on account \)700. (Debit an asset account.)7 Paid office rent of \(600 for the month.11 Completed a tax assignment and billed client \)1,100 for services rendered. (Use Service Revenue account.)12 Received \(3,200 advance on a management consulting engagement.17 Received cash of \)2,300 for services completed for Ferengi Co.21 Paid insurance expense \(110.30 Paid administrative assistant \)1,160 for the month.30 A count of supplies indicated that \(120 of supplies had been used.30 Purchased a new computer for \)6,100 with personal funds. (The computer will be used exclusively for business purposes.)InstructionsJournalize the transactions in the general journal. (Omit explanations.)
The financial statements of (M&S) are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to M&S鈥檚 financial statements and the accompanying notes to answer the following questions.
(a) What were M&S鈥檚 total assets on 28 March 2015? On 29 March 2014?
(b) How much cash (and cash equivalents) did M&S have on 28 March 2015?
(c) What were M&S鈥檚 selling and marketing expenses in 2015? In 2014?
(d) What were M&S鈥檚 revenues in 2015? In 2014?
(e) Using M&S鈥檚 financial statements and related notes, identify items that may result in adjusting entries for prepayments and accruals.
(f) What were the amounts of M&S鈥檚 depreciation and amortization expense in 2014 and 2015?
(LO5) (Closing Entries) Presented below is information related to Gonzales Corporation for the month of January 2017.
Cost of Goods sold \( 208,000 Salaries and wages expenses \)61,000
Delivery expenses \( 7,000 Sales discounts \) 8,000
Insurance expenses \( 12,000 Sales returns and allowances \)13,000
Rent expenses \( 20,000 Sales revenue \)350,000
Instructions:
Prepare the necessary closing entries.
Why are revenue and expense accounts called temporary or nominal accounts?
Is it necessary that a trial balance be taken periodically? What purpose does it serve?
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