ACCT 211 Chapter 3 Exercises

Question #1 a. Depreciation on the company's equipment for 2017 is computed to be $14,000. b. The Prepaid Insurance account had a $7,000 debit balance at December 31, 2017, before adjusting for the costs of any expired ...

Question #1 a. Depreciation on the company's equipment for 2017 is computed to be $14,000. b. The Prepaid Insurance account had a $7,000 debit balance at December 31, 2017, before adjusting for the costs of any expired coverage. An analysis of the company's insurance policies showed that $1,250 of unexpired insurance coverage remains. c. The Office Supplies account had a $300 debit balance on December 31, 2016; and $2,680 of office supplies were purchased during the year. The December 31, 2017, physical count showed $354 of supplies available. d. Three-fourths of the work related to $13,000 of cash received in advance was performed this period. e. The Prepaid Insurance account had a $5,000 debit balance at December 31, 2017, before adjusting for the costs of any expired coverage. An analysis of insura nee policies showed that $3,750 of coverage had expired. f. Wage expenses of $4,000 have been incurred but are not paid as of December 31, 2017. Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each of these separate situations. Question #2 Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the e ight adjusting entries a through g (the balance sheet part of the entries is not shown here) Analyze the statements and prepare the eight adjusting entries a through g that likely were recorded. Note: Answer for a has two entries 30% of (i) the $6,600 adjustment for Fees Earned has been earned but not billed, and (ii) the other 70% has been earned by performing services that were paid for in advance. The following is the adjusted trial balance of Wilson Trucking Company. Account Title Debit Credit Cash $ 5,500 Accounts receivable 16,500 Office supplies 2,000 Trucks 199,000 Accumulated depreciation-Trucks $ 40,994 Land 75,000 Accounts payable 9,500 I nterest payable 3,000 Long -term notes payable 52,000 Common stock 18,000 Retained earnings 173,039 Di vidends 19,000 Trucking fees earned 133,500 Depreciation expense-Trucks 26,441 Salaries expense 62,611 Office supplies expense 12,500 Repairs expense-Trucks 11,481 Totals $430,033 $430,033 The Retained Earnings account balance is $173,039 at December 31, 2016. (1) Prepare the income statement for the year ended December 31, 2017. (2) Prepare the statement of retained earnings for the year ended December 31, 2017. Following are Nintendo's revenue and expense accounts for a recent March 31 fiscal year-end (yen in millions). (Enter answers in millions.) Net sales Cost of sales Advertisi ng expense Other expense, net ¥1,858,622 1,174,981 119,108 397,544 Prepare the company's closing entries for its revenues and its expenses. Question #5 Following are Nintendo's revenue and expense accounts for a recent March 31 fiscal year-end (yen in millions). (Enter answers in millions.) Net sales Cost of sales Advertisi ng expense Other expense, net ¥1,858,622 1,174,981 119,108 397,544 Prepare the company's closing entries for its revenues and its expenses. No Date I General Journal 1 March 31 Net sales Income summary 2 March 31 Income summary Cost of sales Advertising expense Other expense, net Account Title Debit Credit Cash $ 8,800 Accounts receivable 24,500 Office supplies 6,848 Trucks 157,000 Accumulated depreciation-Trucks $ 32,342 Land 45,000 Accounts payable 12,800 Interest payable 11,000 Long-term notes payable 45,000 Common stock 19,000 Retained earnings 112,965 Dividends 20,000 Trucking fees earned 129,000 Depreciation expense-Trucks 20,861 Salaries expense 58,391 Office supplies expense 10,000 Repairs expense-Trucks 10,707 Totals $362,107 $362, 107 Use the above adjusted trial balance to prepare Wilson Trucking Company's classified balance sheet as of December 31, 2017. Use the following information to compute profit margin for each separate company a through e. (Round your answers to 1 decimal place.) Which of the five companies is the most profitable according to the profit margin ratio? Company a Company b • Company c Company d Comput e t he current rat io for each of the following companies. (Round your answers to 2 decima l places.) 2 . Identify the company w ith the strongest liqL1idity position. (These cornpanies represent cornpetitors in the sarne industry.) Analysis: Edison is in the s trongest liquidity position. It has about $2.92 of current assets for each $1 of current liabilities. The only potential concern is t hat Edison may be c a rryi ng too muc h in c u rre nt assets that could b e better spent on more productive asset s (note that its remaining competit ors' c urrent ratios range from 1.61 to 0 .7 1). Arnez Company's annual accounting period ends on December 31, 2017. The following information concerns the adjusting entries to be recorded as of that date. a. The Office Supplies account started the year with a $4,400 balance. During 2017, the company purchased supplies for $18,172, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2017, totaled $3,872. b. An analysis of the company's insurance policies provided the following facts. Months of Policy Date of Purchase Coverage Cost A April 1, 2015 24 $11,640 B April 1, 2016 36 10,440 C August 1, 2017 12 9,240 The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepa id Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) c. The company has 15 employees, who earn a total of $2,950 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2017, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2018. d. The company purchased a building on January 1, 2017. It cost $640,000 and is expected to have a $45,000 salvage value at the end of its predicted 40-year life. Annual depreciation is $14,875. e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $3,400 per month, starting on November 1, 2017. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again. f. On November 1, the company rented space to another tenant for $3,080 per month. The tenant paid five months' rent in advance on that date. The payment was recorded with a credit to the Unearned Rent account. Required: 1. Use the information to prepare adjusting entries as of December 31, 2017. 2. Prepare journal entries to record the first subsequent cash transaction in 2018 for parts c and e. Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2017, follow. Additional Information Items a. An analysis of WTl's insurance policies shows that $2,807 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,433 are available at year-end 2017. c. Annual depreciation on the equipment is $11,227. d. Annual depreciation on the professional library is $5,614. e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,800, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,719 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTl's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) g. WTl's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Tri al Balance Cash Accounts recei vable Teaching suppl ies Prepaid insurance Prepaid rent Professional l ibrary De c embe r 31, 2017 Accumu l ated depreciation- Professional l ibrary Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retai ned earni ngs Dividends Tuition fees earned Training fees earned Deprec i ation expense-Professional library Deprec i ation expense- Equipment Salaries expense I nsurance expense Rent expense Teaching suppl ies expense Advertising expense Utili t i es expense Totals $ $ Debit Credit 27,396 0 10,536 15,806 2,108 31,610 $ 9,484 73,751 16,861 35,522 0 14,000 15,000 52,016 42,149 107,477 40,040 0 0 50,579 0 23,188 0 7,376 5,901 290,400 $290,400 Required information [The following information applies to the questions displayed below.] Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, fol lows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2017, follow. Additional Information Items a. An analysis of WTl's insurance policies shows that $2,807 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,433 are available at year-end 2017. c. Annual depreciation on the equipment is $11,227. d. Annual depreciation on the professional library is $5,614. e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,800, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,719 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTl's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) g. WTl's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library December 31, 2017 Accumulated depreciation- Professional library Equipment Accumul ated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retai ned earnings Di vidends Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Sala ries expense Insurance expense Rent e xpense Teaching supplies expense Adverti si ng expens e Utilities expense Total s Debit $ 27,396 0 10,536 15,806 2,108 31,610 73,751 42,149 0 0 50,579 0 23,188 0 7,376 5,901 $ 290,400 Credit $ 9,484 16,861 35,522 0 14,000 15,000 52,016 107,477 40,040 $290,400 Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2017, follow. Additional Information Items a. An analysis of WTl's insurance policies shows that $2,807 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,433 are available at year-end 2017. c. Annual depreciation on the equipment is $11,227. d. Annual depreciation on the professional library is $5,614. e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,800, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,719 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTl's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) g. WTl's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. Cash Accounts receivable Teaching suppl ies Prepaid insurance Prepaid rent Professional l ibrary WELLS TECHNICAL I NSTITUTE Unadjusted Trial Balance December 31, 2017 Accumulated depreciation- Professional library Equipment Accumulated depreciation- Equipment Accounts payable Salaries payable Unearned training fees Common stock Retained earnings Dividends Tuition fees earned Training fees earned Depreciation expense- Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals $ $ Debit Credit 27,396 0 1,0, 536 15,806 2,108 31,610 $ 9,484 73,751 16,861 35,522 0 14,000 15,000 52,016 42,149 107,477 40,040 0 0 50,579 0 23,188 0 7,376 5,901 290,400 $290,400 Required information [The following information applies to the questions displayed below.] A six-column table for JKL Company follows. The first two columns contain the unadjusted trial balance for the company as of July 31, 2017. The last two columns contain the adjusted trial balance as of the same date. Unadjusted Adjusted Trial Balance Trial Balance Cash $ 95,550 $ 95,550 Accounts rece i vable 8,000 20,500 Office supplies 18,400 4,500 Prepaid insurance 6,340 2,760 Office equipment 81,000 81,000 Accum. Depreciation--Office equip. $ 24,000 $ 34,000 Accounts payable 9,100 20,000 Interest payable 0 1,500 Salaries payable 0 11,000 Unearned consulting fees 20,000 16,000 Long-term notes payable 48,000 48,000 Common stock 26,400 26,400 Retai ned earnings 17,600 17,600 Dividends 9,500 9,500 Consulting fees earned 169,000 185,500 Depreciation expense--Office equip. 0 10,000 Salaries expense 67,290 78,290 Interest expense 1,290 2,790 Insurance expense 0 3,580 Rent expense 14,520 14,520 Office supplies expense 0 13,900 Advertising expense 12,210 23,110 Totals $ 314,100 $314,100 $ 360,000 $360,000 Required information [The following information applies to the questions displayed below.] The adjusted trial balance for Chiara Company as of December 31, 2017, follows. Cash Accounts recei vable I nterest recei vable Notes receivable (due in 90 days) Office supplies Automobiles Accumu lated depreciation-Automobiles Equipment Accumu lated depreciation-Equipment Land Accounts payable I nterest payable Salaries payable Unearned fees Long-term notes payable Common stock Retained earnings Dividends Fees earned I nterest earned Depreciation expense-Automobiles Depreciation expense-Equipment Salaries expense Wages expense I nterest expense Office supplies expense Advertising e xpense Repairs expense-Automobiles Totals Required: $ Debit 186,800 54,500 22,600 170,500 16,000 168,000 144,000 85,000 51,000 25,500 20,000 188,000 39,000 35,200 34,000 58,500 26,200 $1,324,800 Credit $ 85,000 20,000 95,000 50,000 21,000 42,000 142,000 28,580 257,220 564,000 20,000 $1,324,800 1(a) Prepare the income statement for the year ended December 31, 2017. 1(b) Prepare the statement of retained earnings for the year ended December 31, 2017. 1(c) Prepare Chiara Company's balance sheet as of December 31, 2017. On April 1, 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company's first month. April 1 2 Nozomi invested $49,000 cash and computer equipment worth $20,000 in the company in exchange for common stock. The company rented furnished office space by paying $1,800 cash for the first month's (April) rent. 3 The company purchased $1,000 of office supplies for cash. 10 The company paid $2,300 cash for the premium on a 12-mont h insurance policy. Coverage begins on April 11. 14 The company paid $1,700 cash for two weeks' salaries earned by employees. 24 The 28 The company company collected $17,000 cash on commissi ons from airlines on tickets obtained for customers. paid $1,700 cash for t wo weeks' salaries earned by employees. 29 The company paid $400 cash for minor repairs to t he company's computer. 30 The company paid $1,050 cash for this month's telephone bill. 30 The company paid $2,200 cash in dividends. The company's chart of accounts follows: 101 Cash 405 Commissions Earned 106 Accounts Receivable 612 Depreciation Expense-Computer Equip. 124 Office Supplies 622 Salaries Expense 128 Prepaid Insurance 637 Insurance Expense 167 Computer Equipment 640 Rent Expense 168 Accumulated Depreciation- Computer Equip. 650 Office Supplies Expense 209 Salaries Payable 684 Repairs Expense 307 Common Stock 688 Telephone Expense 318 Retained Earnings 901 Income Summary 319 Dividends Use the following information: a. Two-thirds (or $128) of one month's insurance coverage has expired. b. At the end of the month, $800 of office supplies are still available. c. This month's depreciation on the computer equipment is $400. d. Employees earned $320 of unpaid and unrecorded salaries as of month-end. e. The company earned $2,400 of commissions that are not yet billed at month-end. Required: 1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts. 3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30. 4. Journalize and post the adjusting entries for the month and prepare the adjusted trial balance. Sa. Prepare the income statement for the month of April 30, 2017. Sb. Prepare the statement of retained earnings for the month of April 30, 2017. Sc. Prepare the balance sheet at April 30, 2017. Ga. Prepare journal entries to close the temporary accounts and then post to Requirement 6b. 6b. Post the journal entries to the ledger. 7. Prepare a post-closing trial balance.