Question;Week Two Exercise;Assignment;Revenue and Expenses;1. Recognition;of concepts. Ron Carroll operates a small company that books enter?tainers;for theaters, parties, conventions, and so forth. The company?s fiscal year;ends on June 30. Consider the following items and classify each as either (1);pre?paid expense, (2) unearned revenue, (3) accrued expense, (4) accrued;revenue, or (5) none of the foregoing.;a. Amounts paid;on June 30 for a 1-year insurance policy.;b. Professional;fees earned but not billed as of June 30.;c. Repairs to;the firm?s copy machine, incurred and paid in June.;d. An advance;payment from a client for a performance next month at a convention.;e. The payment;in part (d) from the client?s point of view.;f. Interest owed;on the company?s bank loan, to be paid in early July.;g. The bank loan;payable in part (f).;h. Office;supplies on hand at year-end.;2. Understanding the closing process.;Examine the following list of accounts;Interest Payable;Accumulated Depreciation: Equipment;Alex Kenzy, Drawing;Accounts Payable;Service Revenue;Cash;Accounts Receivable;Supplies Expense;Interest Expense;Which of the preceding;accounts;a. appear on a post-closing trial;balance?;b. are commonly known as temporary;or nominal, accounts?;c. generate a debit to Income Summary;in the closing process?;d. are closed to the capital account in the closing process?;3. Adjusting;entries and financial statements. The following information pertains to;Fixation Enterprises;?;The company previously;collected $1,500 as an advance payment for services to be rendered in the;future. By the end of December, one third of this amount had been earned.;?;Fixation provided $2,500 of;services to Artech Corporation, no billing had been made by December 31.;?;Salaries owed to employees at;year-end amounted to $1,650.;?;The Supplies account revealed a;balance of $8,800, yet only $3,300 of supplies were actually on hand at the end;of the period.;?;The company paid $18,000 on;October 1 of the current year to Vantage Property Management. The payment was;for 6 months? rent of Fixation?s headquarters, beginning on November 1.;Fixation?s accounting year ends on December;31.;Instructions;Analyze the five preceding cases;individually and determine the following;a. The typeof adjusting entry needed at year-end (Use the;following codes: A, adjust?ment of a prepaid expense, B, adjustment of an;unearned revenue, C, adjustment to record an accrued expense, or D, adjustment to;record an accrued revenue).;b. The year-end journal entry to adjust the accounts.;c. The income statement impact of each adjustment (e.g., increases;total revenues by $500).;4. Adjusting;entries. You have been retained to examine the records of Kathy?s Day Care;Center as of December 31, 20X3, the close of the current reporting period. In;the course of your examination, you discover the following;?;On January 1, 20X3, the;Supplies account had a balance of $2,350. During the year, $5,520 worth of;supplies was purchased, and a balance of $1,620 remained unused on December 31.;?;Unrecorded interest owed to the;center totaled $275 as of December 31.;?;All clients pay tuition in;advance, and their payments are credited to the Unearned Tuition Revenue;account. The account was credited for $75,500 on August 31. With the exception;of $15,500all amounts were for the current semester ending on December 31.;?;Depreciation on the school?s;van was $3,000 for the year.;?;On August 1, the center began;to pay rent in 6-month installments of $21,000. Kathy wrote a check to the;owner of the building and recorded the check in Pre?paid Rent, a new account.;?;Two salaried employees earn;$400 each for a 5-day week. The employees are paid every Friday, and December;31 falls on a Thursday.;?;Kathy?s Day Care paid insurance;premiums as follows, each time debiting Pre?paid Insurance;Date;Paid;Policy;No.;Length;of Policy;Amount;Feb.;1, 20X2;1033MCM19;1;year;$540;Jan.;1, 20X3;7952789HP;1;year;912;Aug.;1, 20X3;XQ943675ST;2;years;840;Instructions;The center?s accounts were last;adjusted on December 31, 20X2. Prepare the adjusting entries;necessary under the accrual basis of accounting.;5. Bank reconciliation;and entries. The following information was taken from the accounting;records of Palmetto Company for the month of January;Balance per bank;$6,150;Balance per company records;$3,580;Bank service charge for January;$20;Deposits in transit;$940;Interest on note collected by bank;$100;Note collected by bank;$1,000;NSF check returned by the bank with the;bank statement;$650;Outstanding checks;$3,080;Instructions;a.;Prepare Palmetto?s January bank reconciliation.;b. Prepare any necessary journal entries for;Palmetto.;6. Direct;write-off method. Harrisburg Company, which began business in early 20X7;reported $40,000 of accounts receivable on the December 31, 20X7, balance;sheet. Included in this amount was $550 for;a sale made to Tom Mattingly in July. On January 4, 20X8, the company learned;that Mattingly had filed for personal bankruptcy. Harrisburg uses the direct;write-off method to account for uncollectibles.;a. Prepare the journal entry needed;to write off Mattingly?s account.;b. Comment on the ability of the direct write-off method to;value receivables on the year-end balance sheet.;7. Allowance;method: analysis of receivables. At a January 20X2 meeting, the presi?dent;of Sonic Sound directed the sales staff ?to move some product this year.? The;president noted that the credit evaluation department was being disbanded be?cause;it had restricted the company?s growth. Credit decisions would now be made by;the sales staff.;By the end of the;year, Sonic had generated significant gains in sales, and the president was;very pleased. The following data were provided by the accounting department;20X2;20X1;Sales;$23,987,000;$8,423,000;Accounts Receivable, 12/31;12,444,000;1,056,000;Allowance for Uncollectible Accounts;12/31;?;23,000 cr.;The $12,444,000 receivables balance was;aged as follows;Age of Receivable;Amount;Percentage of Accounts Expected to Be;Collected;Under 31 days;$5,321,000;99%;31260 days;3,890,000;90;61290 days;1,067,000;80;Over 90 days;2,166,000;60;Assume;that no accounts were written off during 20X2.;Instructions;a.;Estimate the amount of Uncollectible Accounts as of December 31, 20X2.;b.;What is the company?s Uncollectible Accounts expense for 20X2?;c.;Compute the net realizable value of Accounts Receivable at the end of 20X1 and;20X2.;d. Compute;the net realizable value at the end of 20X1 and 20X2 as a percentage of;respective year-end receivables balances. Analyze your findings and comment on;the president?s decision to close the credit evaluation department.
Paper#42990 | Written in 18-Jul-2015Price : $37