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Included in Gonzalez Company’s December 31 trial balance is a note receivable of $12,000. The note
\r\nis a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record $300 of accrued interest, and the February 1 journal entry to record receipt of $12,400 from the borrower.
Dresser Company’s weekly payroll, paid on Fridays, totals $8,000. Employees work a 5-day week.
\r\nPrepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the $8,000 cash payment on Friday, January 2.
LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $2,400 received in advance. Prepare LaBouche’s November 1 journal entry and the December 31 annual adjusting entry.
Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for
\r\nZubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue.
On July 1, 2014, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.
Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship.
\r\nJournalize the transactions. (Omit explanations.) Aug. 2 Invested $12,000 cash and $2,500 of equipment in the business. 7 Purchased supplies on account for $500. (Debit asset account.)
\r\n12 Performed services for clients, for which $1,300 was collected in cash and $670 was billed to the clients. 15 Paid August rent $600.
\r\n19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.
Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.) May 1 B.D. Mehta invests $4,000 cash in exchange for common stock in a small welding corporation. 3 Buys equipment on account for $1,100.
\r\n13 Pays $400 to landlord for May rent. 21 Bills Noble Corp. $500 for welding work done.
“A worksheet is a permanent accounting record, and its use is required in the accounting cycle.” Do you agree? Explain.
What are reversing entries, and why are they used?
List two types of transactions that would receive different accounting treatment using (a) strict cash-basis accounting, and (b) a modified cash basis.
When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages
\r\nsubtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?
Distinguish between cash-basis accounting and accrualbasis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?
Midwest Enterprises made the following entry on
\r\nDecember 31, 2014.
\r\nInterest Expense 10,000
\r\nInterest Payable 10,000
\r\n(To record interest expense due on loan from Anaheim
\r\nNational Bank)
\r\nWhat entry would Anaheim National Bank make regarding its outstanding loan to Midwest Enterprises? Explain why this must be the case.
Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department.
\r\nCost of mower and Date purchased 7/1/14 accessories $4,000 Monthly salary of
\r\nEstimated useful life 5 yrs groundskeeper $1,100 Salvage value $0 Estimated annual fuel cost $150 Compute the amount of depreciation expense (related to the mower and accessories) that should be reported on Boston’s December 31, 2014, income statement. Assume straight-line depreciation.
What are closing entries and why are they necessary?
What are adjusting entries and why are they necessary?
What differences are there between the trial balance before closing and the trial balance after closing with respect to the following accounts?
\r\n(a) Accounts Payable.
\r\n(b) Expense accounts.
\r\n(c) Revenue accounts.
\r\n(d) Retained Earnings account.
\r\n(e) Cash.
(a) How are the components of revenues and expenses different for a merchandising company? (b) Explain the income measurement process of a merchandising company.
Employees are paid every Saturday for the preceding work week. If a balance sheet is prepared on Wednesday, December 31, what does the amount of wages earned during the first three days of the week (12/29, 12/30, 12/31) represent? Explain.
Indicate whether each of the following items is a real or nominal account and whether it appears in the balance sheet or the income statement.
\r\n(a) Prepaid Rent.
\r\n(b) Salaries and Wages Payable.
\r\n(c) Inventory.
\r\n(d) Accumulated Depreciation—Equipment.
\r\n(e) Equipment.
\r\n(f) Service Revenue.
\r\n(g) Salaries and Wages Expense.
\r\n(h) Supplies.
Is it necessary that a trial balance be taken periodically? What purpose does it serve?
Andrea Pafko, a fellow student, contends that the doubleentry system means that each transaction must be recorded twice. Is Andrea correct? Explain.
Why are revenue and expense accounts called temporary or nominal accounts?
Name the accounts debited and credited for each of the following transactions.
\r\n(a) Billing a customer for work done.
\r\n(b) Receipt of cash from customer on account.
\r\n(c) Purchase of office supplies on account.
\r\n(d) Purchase of 15 gallons of gasoline for the delivery truck.
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