Search This Blog

Loading...

Accounting Tools for Business Decision Making - 4th edition by Paul D. Kimmel, Jerry J. Weygandt and Donald E. Kieso

Accounting Tools for Business Decision Making 4th edition

Paul D. KimmelJerry J. Weygandt and Donald E. Kieso

Solutions Manual Test Bank

Accounting : Tools for Business Decision Making (ISBN10: 0470534788; ISBN13: 9780470534786)   

Solutions Manual + Test Bank -- $35  Buy Now


Click here download the sample chapter.

* Contact us if you need help.



Contents:
Solutions Manual Chapter 1 - 23
Test Bank Chapter 1 - 14
Achievement Test Chapter 14 - 23
Final Exam: Chapters 14-23
Comprehensive_exam e - h

Sample Chapter 4

Questions

1.
(a) How does the periodicity assumption affect an accountant’s analysis of accounting transactions? (b) Explain the term fiscal year.
2.
Identify and state two generally accepted accounting principles that relate to adjusting the accounts. types of accounts is debited and which is credited in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense.
3.
Don Wishne, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Wishne’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
4. In completing the engagement in question 3, Wishne pays no costs in March, $2,500 in April, and $2,200 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why? 
 5. “The cost principle of accounting requires adjusting entries.” Do you agree? Explain.
 6.
Why may the financial information in an unadjusted trial balance not be up-to-date and complete?
 7.
Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category.
 8.
What types of accounts does a company debit and credit in a prepaid expense adjusting entry?
 9.
“Depreciation is a process of valuation that results in the reporting of the fair value of the asset.” Do you agree? Explain.
10.
Explain the differences between depreciation expense and accumulated depreciation.
11.
Greenstreet Company purchased equipment for $15,000. By the current balance sheet date, the company had depreciated $7,000. Indicate the balance sheet presentation of the data.
12.
What types of accounts are debited and credited in an unearned revenue adjusting entry?
13.
Data Technologies provides maintenance service for computers and office equipment for companies throughout the Northeast. The sales manager is elated because she closed a $300,000 three-year maintenance contract on December 29, 2011, two days before the company’s year-end. “Now we will hit this year’s net income target for sure,” she crowed. The customer is required to pay $100,000 on December 29 (the day the deal was closed). Two more payments of $100,000 each are also required on December 29, 2012 and 2013. Discuss the effect that this event will have on the company’s financial statements.
14.
ValuMart, a large national retail chain, is nearing its fiscal year-end. It appears that the company is not going to hit its revenue and net income targets. The company’s marketing manager, Chris Ahrentzen, suggests running a promotion selling $50 gift cards for $45. He believes that this would be very popular and would enable the company to meet its targets for revenue and net income. What do you think of this idea?
15.
A company fails to recognize revenue earned but not yet received. Which of the following types of accounts are involved in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense? For the accounts selected, indicate whether they would be debited or credited in the entry.
16.
A company fails to recognize an expense incurred but not paid. Indicate which of the following
17.
A company makes an accrued revenue adjusting entry for $780 and an accrued expense adjusting entry for $510. How much was net income understated prior to these entries? Explain.
18.
On January 9 a company pays $6,200 for salaries, of which $1,100 was reported as Salaries and Wages Payable on December 31. Give the entry to record the payment.
19.
For each of the following items before adjustment, indicate the type of adjusting entry—prepaid expense, unearned revenue, accrued revenue, and accrued expense— that is needed to correct the misstatement. If an item could result in more than one type of adjusting entry, indicate each of the types. (a) Assets are understated. (b) Liabilities are overstated. (c) Liabilities are understated. (d) Expenses are understated. (e) Assets are overstated. (f) Revenue is understated.
20.
One-half of the adjusting entry is given below. Indicate the account title for the other half of the entry. (a) Salaries and Wages Expense is debited. (b) Depreciation Expense is debited. (c) Interest Payable is credited. (d) Supplies is credited. (e) Accounts Receivable is debited. (f) Unearned Service Revenue is debited.
21.
“An adjusting entry may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?
22.
Which balance sheet account provides evidence that Tootsie Roll records sales on an accrual basis rather than a cash basis? Explain.
23.
Why is it possible to prepare financial statements directly from an adjusted trial balance?
24.
(a) What information do accrual basis financial statements provide that cash basis statements do not? (b) What information do cash basis financial statements provide that accrual basis statements do not?
25.
What is the relationship, if any, between the amount shown in the adjusted trial balance column for an account and that account’s ledger balance?
26.
Identify the account(s) debited and credited in each of the four closing entries, assuming the company has net income for the year.
27.
Some companies employ technologies that allow them to do a so-called “virtual close.” This enables them to close their books nearly instantaneously any time during the year. What advantages does a “virtual close” provide?
28.
Describe the nature of the Income Summary account, and identify the types of summary data that may be posted to this account.
29.
What items are disclosed on a post-closing trial balance, and what is its purpose?
30.
Which of these accounts would not appear in the post-closing trial balance? Interest Payable, Equipment, Depreciation Expense, Dividends, Unearned Service Revenue, Accumulated Depreciation— Equipment, and Service Revenue.
31.
Indicate, in the sequence in which they are made, the three required steps in the accounting cycle that involve journalizing.
32.
Identify, in the sequence in which they are prepared, the three trial balances that are required in the accounting cycle.
33.
Explain the terms earnings management and quality of earnings.
34.
Give examples of how companies manage earnings.
*35.
What is the purpose of a worksheet?
*36.
What is the basic form of a worksheet?

Brief Exercises


BE4-1 Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. Net Cash Income (a) Purchased $100 of supplies for cash. _$100 $ 0 (b) Recorded an adjusting entry to record use of $20 of the above supplies. (c) Made sales of $1,300, all on account. (d) Received $800 from customers in payment of their accounts. (e) Purchased equipment for cash, $2,500. (f) Recorded depreciation of building for period used, $600. 

BE4-2
The ledger of Hubbard Company includes the following accounts. Explain why each account may require adjustment. (a) Prepaid Insurance. (b) Depreciation Expense. (c) Unearned Service Revenue. (d) Interest Payable.

BE4-3
Dicker Company accumulates the following adjustment data at December 31. Indicate (1) the type of adjustment (prepaid expense, accrued revenue, and so on) and (2) the status of the accounts before adjustment (overstated or understated). (a) Supplies of $400 are on hand. Supplies account shows $1,600 balance. (b) Service Revenue earned but unbilled total $700. (c) Interest of $300 has accumulated on a note payable. (d) Rent collected in advance totaling $1,100 has been earned.

BE4-4
Stagg Advertising Company’s trial balance at December 31 shows Supplies $8,800 and Supplies Expense $0. On December 31 there are $1,100 of supplies on hand. Prepare the adjusting entry at December 31 and, using T accounts, enter the balances in the accounts, post the adjusting entry, and indicate the adjusted balance in each account.

BE4-5
At the end of its first year, the trial balance of Jules Company shows Equipment $22,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $2,750. Prepare the adjusting entry for depreciation at December 31, post the adjustments to T accounts, and indicate the balance sheet presentation of the equipment at December 31.

BE4-6
On July 1, 2012, Ryhn Co. pays $12,400 to Craig Insurance Co. for a 2-year insurance contract. Both companies have fiscal years ending December 31. For Ryhn Co., journalize and post the entry on July 1 and the adjusting entry on December 31.

BE4-7
Using the data in

BE4-6, journalize and post the entry on July 1 and the adjusting entry on December 31 for Craig Insurance Co. Craig uses the accounts Unearned Service Revenue and Service Revenue.

BE4-8
The bookkeeper for Forseth Company asks you to prepare the following accrual adjusting entries at December 31. Identify impact of transactions on cash and net income. (SO 2, 9), C Indicate why adjusting entries are needed. (SO 3), C Prepare adjusting entry for supplies. (SO 4), AP Prepare adjusting entry for depreciation. (SO 4), AP Prepare adjusting entry for prepaid expense. (SO 4), AP Prepare adjusting entry for unearned revenue. (SO 4), AP Prepare adjusting entries for accruals. (SO 5), AP Identify the major types of adjusting entries. (SO 3), AN (a) Interest on notes payable of $300 is accrued. (b) Service revenue earned but unbilled totals $1,700. (c) Salaries of $780 earned by employees have not been recorded. Use these account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, and Salaries and Wages Payable.

BE4-9
The trial balance of LaGrace Company includes the following balance sheet accounts. Identify the accounts that might require adjustment. For each account that requires adjustment, indicate (1) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, and accrued expenses) and (2) the related account in the adjusting entry. (a) Accounts Receivable. (e) Notes Payable. (b) Prepaid Insurance. (f ) Interest Payable. (c) Equipment. (g) Unearned Service Revenue. (d) Accumulated Depreciation—Equipment.

BE4-10
The adjusted trial balance of Hanlon Corporation at December 31, 2012, includes the following accounts: Retained Earnings $17,200; Dividends $6,000; Service Revenue $32,000; Salaries and Wages Expense $14,000; Insurance Expense $1,800; Rent Expense $3,900; Supplies Expense $1,500; and Depreciation Expense $1,000. Prepare an income statement for the year.

BE4-11
Partial adjusted trial balance data for Hanlon Corporation are presented in

BE4- 10. The balance in Retained Earnings is the balance as of January 1. Prepare a retained earnings statement for the year assuming net income is $10,400.

BE4-12
The following selected accounts appear in the adjusted trial balance for Cohen Company. Indicate the financial statement on which each account would be reported. (a) Accumulated Depreciation. (e) Service Revenue. (b) Depreciation Expense. (f ) Supplies. (c) Retained Earnings (beginning). (g) Accounts Payable. (d) Dividends.

BE4-13
Using the data in

BE4-12, identify the accounts that would be included in a post-closing trial balance.

BE4-14
The income statement for the Timberline Golf Club Inc. for the month ended July 31 shows Service Revenue $16,000; Salaries and Wages Expense $8,400; Maintenance and Repairs Expense $2,500; and Income Tax Expense $1,000. The statement of retained earnings shows an opening balance for Retained Earnings of $20,000 and Dividends $1,300. (a) Prepare closing journal entries. (b) What is the ending balance in Retained Earnings?

BE4-15
The required steps in the accounting cycle are listed in random order below. List the steps in proper sequence. (a) Prepare a post-closing trial balance. (b) Prepare an adjusted trial balance. (c) Analyze business transactions. (d) Prepare a trial balance. (e) Journalize the transactions. (f ) Journalize and post closing entries. (g) Prepare financial statements. (h) Journalize and post adjusting entries. (i) Post to ledger accounts. Prepare an income statement from an adjusted trial balance. (SO 6), AP Prepare a retained earnings statement from an adjusted trial balance. (SO 6), AP Identify financial statement for selected accounts. (SO 6), K Identify post-closing trial balance accounts. (SO 7), K Prepare and post closing entries. (SO 7), AP Analyze accounts in an adjusted trial balance. (SO 6), AN List required steps in the accounting cycle sequence. (SO 8), K

4-1
The ledger of Witzling, Inc. on March 31, 2012, includes the following selected accounts before adjusting entries. Debit Credit Prepaid Insurance 2,400 Supplies 2,500 Equipment 30,000 Unearned Service Revenue 10,000 Do it! Do it! Review Prepare adjusting entries for deferrals. (SO 4), AP An analysis of the accounts shows the following: 1. Insurance expires at the rate of $300 per month. 2. Supplies on hand total $900. 3. The office equipment depreciates $200 per month. 4. 2/5 of the unearned service revenue was earned in March.

Prepare the adjusting entries for the month of March.

4-2
Tammy Krause is the new owner of Tammy’s Computer Services. At the end of July 2012, her first month of ownership, Tammy is trying to prepare monthly financial statements. She has the following information for the month. 1. At July 31, Krause owed employees $1,100 in salaries that the company will pay in August. 2. On July 1, Krause borrowed $20,000 from a local bank on a 10-year note. The annual interest rate is 9%. 3. Service revenue unrecorded in July totaled $1,600.

Prepare the adjusting entries needed at July 31, 2012.

4-3
Indicate in which financial statement each of the following adjusted trial balance accounts would be presented. Service Revenue Accounts Receivable Notes Payable Accumulated Depreciation Common Stock Utilities Expense

4-4
After closing revenues and expense, Natraj Company shows the following account balances. Dividends $22,000 Retained Earnings 70,000 Income Summary 36,000 (credit balance) Prepare the remaining closing entries at December 31. Do it! Do it! Do it! Exercises 203 Prepare adjusting entries for accruals. (SO 5), AP Prepare financial statements from adjusted trial balance. (SO 6), C Prepare closing entries. (SO 7), AP

Exercises

E4-1
The following independent situations require professional judgment for determining when to recognize revenue from the transactions. (a) Southwest Airlines sells you an advance-purchase airline ticket in September for your flight home at Christmas. (b) Ultimate Electronics sells you a home theatre on a “no money down and full payment in three months” promotional deal. (c) The Toronto Blue Jays sell season tickets online to games in the Skydome. Fans can purchase the tickets at any time, although the season doesn’t officially begin until April. The major league baseball season runs from April through October. (d) You borrow money in August from RBC Financial Group. The loan and the interest are repayable in full in November. (e) In August, you order a sweater from Sears using its online catalog. The sweater arrives in September, and you charge it to your Sears credit card. You receive and pay the Sears bill in October.

Instructions
Identify when revenue should be recognized in each of the above situations.

E4-2
These are the assumptions, principles, and constraints discussed in this and previous chapters. 1. Economic entity assumption. 6. Materiality constraint. 2. Expense recognition principle. 7. Full disclosure principle. 3. Monetary unit assumption. 8. Going concern assumption. 4. Periodicity assumption. 9. Revenue recognition principle. 5. Cost principle. 10. Cost constraint. Identify point of revenue recognition. (SO 1), C Identify accounting assumptions, principles, and constraints. (SO 1), K

Instructions
Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once. _____ (a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use the cost principle.) _____ (b) Indicates that personal and business record-keeping should be separately maintained. _____ (c) Ensures that all relevant financial information is reported. _____ (d) Assumes that the dollar is the “measuring stick” used to report on financial performance. _____ (e) Requires that accounting standards be followed for all significant items. _____ (f) Separates financial information into time periods for reporting purposes. _____ (g) Requires recognition of expenses in the same period as related revenues. _____ (h) Indicates that fair value changes subsequent to purchase are not recorded in the accounts.

E4-3
Here are some accounting reporting situations. (a) Dorfner Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. (b) Rayms Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.) (c) Tariq, Inc. is carrying inventory at its original cost of $100,000. Inventory has a fair value of $110,000. (d) Leer Hospital Supply Corporation reports only current assets and current liabilities on its balance sheet. Property, plant, and equipment and bonds payable are reported as current assets and current liabilities, respectively. Liquidation of the company is unlikely. (e) Kim Company has inventory on hand that cost $400,000. Kim reports inventory on its balance sheet at its current fair value of $425,000. (f ) Kris Piwek, president of Classic Music Company, bought a computer for her personal use. She paid for the computer by using company funds and debited the “Computers” account.

Instructions
For each situation, list the assumption, principle, or constraint that has been violated, if any. Some of these assumptions, principles, and constraints were presented in earlier chapters. List only one answer for each situation.

E4-4
Your examination of the records of a company that follows the cash basis of accounting tells you that the company’s reported cash basis earnings in 2012 are $33,640. If this firm had followed accrual basis accounting practices, it would have reported the following year-end balances. 2012 2011 Accounts receivable $3,400 $2,800 Supplies on hand 1,300 1,460 Unpaid wages owed 2,000 2,400 Other unpaid amounts 1,400 1,100

Instructions
Determine the company’s net earnings on an accrual basis for 2012. Show all your calculations in an orderly fashion.

E4-5
In its first year of operations, Lazirko Company earned $28,000 in service revenue, $6,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers. The company incurred operating expenses of $15,800. Of these expenses, $12,000 were paid in cash; $3,800 was still owed on account at year-end. In addition, Lazirko prepaid $2,400 for insurance coverage that would not be used until the second year of operations.

Instructions
(a) Calculate the first year’s net earnings under the cash basis of accounting, and calculate the first year’s net earnings under the accrual basis of accounting. Identify the violated assumption, principle, or constraint. (SO 1), C Convert earnings from cash to accrual basis. (SO 2, 4, 5, 9), AP Determine cash-basis and accrual-basis earnings. (SO 2, 9), AP Exercises 205 (b) Which basis of accounting (cash or accrual) provides more useful information for decision makers?

E4-6
Mt. Horeb Company, a ski tuning and repair shop, opened in November 2011. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2012. Cash Cash Receipts Payments Issue of common shares $20,000 Payment for repair equipment $ 9,200 Rent payments 1,225 Newspaper advertising payment 375 Utility bills payments 970 Part-time helper’s wages payments 2,600 Income tax payment 10,000 Cash receipts from ski and snowboard repair services 32,150 Subtotals 52,150 24,370 Cash balance 27,780 Totals $52,150 $52,150 You learn that the repair equipment has an estimated useful life of 4 years. The company rents space at a cost of $175 per month on a one-year lease. The lease contract requires payment of the first and last months’ rent in advance, which was done. The part-time helper is owed $420 at April 30, 2012, for unpaid wages. At April 30, 2012, customers owe Mt. Horeb Company $420 for services they have received but have not yet paid for.

Instructions
(a) Prepare an accrual-basis income statement for the 6 months ended April 30, 2012. (b) Prepare the April 30, 2012, classified balance sheet.

E4-7
KidVid, a maker of electronic games for kids, has just completed its first year of operations. The company’s sales growth was explosive. To encourage large national stores to carry its products, KidVid offered 180-day financing—meaning its largest customers do not pay for nearly 6 months. Because KidVid is a new company, its components suppliers insist on being paid cash on delivery. Also, it had to pay up front for 2 years of insurance. At the end of the year, KidVid owed employees for one full month of salaries, but due to a cash shortfall, it promised to pay them the first week of next year.

Instructions
(a) Explain how cash and accrual accounting would differ for each of the events listed above and describe the proper accrual accounting. (b) Assume that at the end of the year KidVid reported a favorable net income, yet the company’s management is concerned because the company is very short of cash. Explain how KidVid could have positive net income and yet run out of cash.

E4-8
Peng Company accumulates the following adjustment data at December 31. (a) Service Revenue earned but unbilled totals $600. (b) Store supplies of $160 are on hand. Supplies account shows $1,900 balance. (c) Utility expenses of $275 are unpaid. (d) Service revenue of $490 collected in advance has been earned. (e) Salaries of $620 are unpaid. (f) Prepaid insurance totaling $400 has expired.

Instructions
For each item, indicate (1) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or understated).

E4-9
The ledger of Sagovic Rental Agency on March 31 of the current year includes the selected accounts on page 206 before adjusting entries have been prepared. Convert earnings from cash to accrual basis; prepare accrual-based financial statements. (SO 2, 4, 5, 9), AP Identify differences between cash and accrual accounting. (SO 2, 3, 9), C Identify types of adjustments and accounts before adjustment. (SO 3, 4, 5), AN Prepare adjusting entries from selected account data. (SO 4, 5), AP Debits Credits Prepaid Insurance $ 3,600 Supplies 3,000 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 12,400 Rent Revenue 60,000 Interest Expense 0 Salaries and Wages Expense 14,000 An analysis of the accounts shows the following. 1. The equipment depreciates $280 per month. 2. Half of the unearned rent revenue was earned during the quarter. 3. Interest of $400 is accrued on the notes payable. 4. Supplies on hand total $850. 5. Insurance expires at the rate of $400 per month.

Instructions
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

E4-10
Adam Singh, D.D.S., opened an incorporated dental practice on January 1, 2012. During the first month of operations the following transactions occurred: 1. Performed services for patients who had dental plan insurance. At January 31, $760 of such services was earned but not yet billed to the insurance companies. 2. Utility expenses incurred but not paid prior to January 31 totaled $450. 3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable (Interest is paid each December 31). The equipment depreciates $400 per month. Interest is $500 per month. 4. Purchased a 1-year malpractice insurance policy on January 1 for $24,000. 5. Purchased $1,750 of dental supplies (recorded as increase to Supplies). On January 31 determined that $550 of supplies were on hand.

Instructions
Prepare the adjusting entries on January 31. Account titles are: Accumulated Depreciation— Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.

E4-11
The unadjusted trial balance for Sierra Corp. is shown in Illustration 4-4 (page 168). In lieu of the adjusting entries shown in the text at October 31, assume the following adjustment data. 1. Supplies on hand at October 31 total $500. 2. Expired insurance for the month is $100. 3. Depreciation for the month is $75. 4. As of October 31, $800 of the previously recorded unearned revenue had been earned. 5. Services provided but unbilled (and no receivable has been recorded) at October 31 are $280. 6. Interest expense accrued at October 31 is $70. 7. Accrued salaries at October 31 are $1,400.

Instructions
Prepare the adjusting entries for the items above.

E4-12
The income statement of Kaleta Co. for the month of July shows net income of $1,500 based on Service Revenue $5,500; Salaries and Wages Expense $2,100; Supplies Expense $900, and Utilities Expense $500. In reviewing the statement, you discover the following: 1. Insurance expired during July of $350 was omitted. 2. Supplies expense includes $200 of supplies that are still on hand at July 31. 3. Depreciation on equipment of $150 was omitted. 4. Accrued but unpaid wages at July 31 of $360 were not included. 5. Revenue earned but unrecorded totaled $700. Prepare adjusting entries. (SO 4, 5), AP Prepare adjusting entries. (SO 4, 5), AP Prepare a correct income statement. (SO 1, 4, 5, 6), AP

Instructions
Prepare a correct income statement for July 2012.

E4-13
This is a partial adjusted trial balance of Fenske Company. FENSKE COMPANY Adjusted Trial Balance January 31, 2012 Debit Credit Supplies $ 700 Prepaid Insurance 1,560 Salaries and Wages Payable $1,060 Unearned Service Revenue 750 Supplies Expense 950 Insurance Expense 520 Salaries and Wages Expense 1,800 Service Revenue 2,000

Instructions
Answer these questions, assuming the year begins January 1. (a) If the amount in Supplies Expense is the January 31 adjusting entry, and $300 of supplies was purchased in January, what was the balance in Supplies on January 1? (b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for 1 year, what was the total premium and when was the policy purchased? (c) If $2,500 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2011? (d) If $1,800 was received in January for services performed in January, what was the balance in Unearned Service Revenue at December 31, 2011?

E4-14
A partial adjusted trial balance for Fenske Company is given in

E4-13.

Instructions
Prepare the closing entries at January 31, 2012.

E4-15
Selected accounts of Sandin Company are shown here. Exercises 207 Supplies Expense July 31 750 Salaries and Wages Payable July 31 1,000 Salaries and Wages Expense July 15 1,000 31 1,000 Service Revenue July 14 3,800 31 900 31 500 Supplies July 1 Bal. 1,100 July 31 750 10 200 Accounts Receivable July 31 500 Unearned Service Revenue July 31 900 July 1 Bal. 1,500 20 600

Instructions
After analyzing the accounts, journalize (a) the July transactions and (b) the adjusting entries that were made on July 31. (Hint: July transactions were for cash.)

E4-16
The trial balances shown on page 208 are before and after adjustment for Amit Company at the end of its fiscal year. Analyze adjusted data. (SO 1, 4, 5, 6), AN Prepare closing entries. (SO 7), AP Prepare adjusting entries from analysis of trial balance. (SO 4, 5, 6), AP Journalize basic transactions and adjusting entries. (SO 4, 5, 6), AN

Instructions
Prepare the adjusting entries that were made.

E4-17
The adjusted trial balance for Amit Company is given in

E4-16.

Instructions
Prepare the income and retained earnings statements for the year and the classified balance sheet at August 31.

E4-18
The adjusted trial balance for Amit Company is given in

E4-16.

Instructions
Prepare the closing entries for the temporary accounts at August 31. Exercises: Set B and Challenge Exercises Visit the book’s companion website, at www.wiley.com/college/kimmel, and choose the Student Companion site to access Exercise Set B and Challenge Exercises. Problems: Set A

P4-1A
The following selected data are taken from the comparative financial statements of Superior Curling Club. The club prepares its financial statements using the accrual basis of accounting. September 30 2012 2011 Accounts receivable for member dues $ 15,000 $ 19,000 Unearned sales revenue 20,000 23,000 Service revenue (from member dues) 151,000 $135,000 Dues are billed to members based upon their use of the club’s facilities. Unearned sales revenues arise from the sale of tickets to events, such as the Skins Game. AMIT COMPANY Trial Balance August 31, 2012 Before After Adjustment Adjustment Dr. Cr. Dr. Cr. Cash $10,900 $10,900 Accounts Receivable 8,800 9,400 Supplies 2,500 500 Prepaid Insurance 4,000 2,500 Equipment 16,000 16,000 Accumulated Depreciation—Equipment $ 3,600 $ 4,800 Accounts Payable 5,800 5,800 Salaries and Wages Payable 0 1,100 Unearned Rent Revenue 1,800 800 Common Stock 10,000 10,000 Retained Earnings 5,500 5,500 Dividends 2,800 2,800 Service Revenue 34,000 34,600 Rent Revenue 12,100 13,100 Salaries and Wages Expense 17,000 18,100 Supplies Expense 0 2,000 Rent Expense 10,800 10,800 Insurance Expense 0 1,500 Depreciation Expense 0 1,200 $72,800 $72,800 $75,700 $75,700 Prepare financial statements from adjusted trial balance. (SO 6), AP Prepare closing entries. (SO 7), AP Record transactions on accrual basis; convert revenue to cash receipts. (SO 2, 4, 9), AP

Instructions
(Hint: You will find it helpful to use T accounts to analyze the following data. You must analyze these data sequentially, as missing information must first be deduced before moving on. Post your journal entries as you progress, rather than waiting until the end.) (a) Prepare journal entries for each of the following events that took place during 2012. 1. Dues receivable from members from 2011 were all collected during 2012. 2. Unearned sales revenue at the end of 2011 was all earned during 2012. 3. Additional tickets were sold for $44,000 cash during 2012; a portion of these were used by the purchasers during the year. The entire balance remaining in Unearned Sales Revenue relates to the upcoming Skins Game in 2012. 4. Dues for the 2011–2012 fiscal year were billed to members. 5. Dues receivable for 2012 (i.e., those billed in item (4) above) were partially collected. (b) Determine the amount of cash received by the Club from the above transactions during the year ended September 30, 2012.

P4-2A
Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012. The trial balance at June 30 is as follows. VOGEL CONSULTING Trial Balance June 30, 2012 Debit Credit Cash $ 6,850 Accounts Receivable 7,000 Prepaid Insurance 2,880 Supplies 2,000 Equipment 15,000 Accounts Payable $ 4,230 Unearned Service Revenue 5,200 Common Stock 22,000 Service Revenue 8,300 Salaries and Wages Expense 4,000 Rent Expense 2,000 $39,730 $39,730 In addition to those accounts listed on the trial balance, the chart of accounts for Vogel also contains the following accounts: Accumulated Depreciation—Equipment, Utilities Payable, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense. Other data: 1. Supplies on hand at June 30 total $720. 2. A utility bill for $180 has not been recorded and will not be paid until next month. 3. The insurance policy is for a year. 4. $4,100 of unearned service revenue has been earned at the end of the month. 5. Salaries of $1,250 are accrued at June 30. 6. The equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months. 7. Invoices representing $3,900 of services performed during the month have not been recorded as of June 30.

Instructions
(a) Prepare the adjusting entries for the month of June. (b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts. (c) Prepare an adjusted trial balance at June 30, 2012. Problems: Set A 209 Prepare adjusting entries, post to ledger accounts, and prepare adjusted trial balance. (SO 4, 5, 6), AP (b) Cash received $199,000 (b) Service rev. $16,300 (c) Tot. trial balance $45,310

P4-3A
The Vang Hotel opened for business on May 1, 2012. Here is its trial balance before adjustment on May 31. VANG HOTEL Trial Balance May 31, 2012 Debit Credit Cash $ 2,500 Prepaid Insurance 1,800 Supplies 2,600 Land 15,000 Buildings 70,000 Equipment 16,800 Accounts Payable $ 4,700 Unearned Rent Revenue 3,300 Mortgage Payable 36,000 Common Stock 60,000 Rent Revenue 9,000 Salaries and Wages Expense 3,000 Utilities Expense 800 Advertising Expense 500 $113,000 $113,000 Other data: 1. Insurance expires at the rate of $450 per month. 2. A count of supplies shows $1,050 of unused supplies on May 31. 3. Annual depreciation is $3,600 on the building and $3,000 on equipment. 4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.) 5. Unearned rent of $2,500 has been earned. 6. Salaries of $900 are accrued and unpaid at May 31.

Instructions
(a) Journalize the adjusting entries on May 31. (b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting entries. (c) Prepare an adjusted trial balance on May 31. (d) Prepare an income statement and a retained earnings statement for the month of May and a classified balance sheet at May 31. (e) Identify which accounts should be closed on May 31.

P4-4A
Rolling Hills Golf Inc. was organized on July 1, 2012. Quarterly financial statements are prepared. The trial balance and adjusted trial balance on September 30 are shown here. ROLLING HILLS GOLF INC. Trial Balance September 30, 2012 Unadjusted Adjusted Dr. Cr. Dr. Cr. Cash $ 6,700 $ 6,700 Accounts Receivable 400 1,000 Prepaid Rent 1,800 900 Supplies 1,200 180 Equipment 15,000 15,000 Accumulated Depreciation—Equipment $ 350 Notes Payable $ 5,000 5,000 Accounts Payable 1,070 1,070 Salaries and Wages Payable 600 Interest Payable 50 Unearned Rent Revenue 1,000 800 Common Stock 14,000 14,000 Retained Earnings 0 0 Dividends 600 600 Prepare adjusting entries, adjusted trial balance, and financial statements. (SO 4, 5, 6, 7), AP (c) Rent revenue $11,500 Tot. adj. trial balance $114,630 (d) Net income $3,570 Prepare adjusting entries and financial statements; identify accounts to be closed. (SO 4, 5, 6, 7), AP Unadjusted Adjusted Dr. Cr. Dr. Cr. Service Revenue 14,100 14,700 Rent Revenue 700 900 Salaries and Wages Expense 8,800 9,400 Rent Expense 900 1,800 Depreciation Expense 350 Supplies Expense 1,020 Utilities Expense 470 470 Interest Expense 50 $35,870 $35,870 $37,470 $37,470

Instructions
(a) Journalize the adjusting entries that were made. (b) Prepare an income statement and a retained earnings statement for the 3 months ending September 30 and a classified balance sheet at September 30. (c) Identify which accounts should be closed on September 30. (d) If the note bears interest at 12%, how many months has it been outstanding?

P4-5A
A review of the ledger of Terrell Company at December 31, 2012, produces these data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $15,200. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2011, for $9,600. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2012, for $7,200. This policy has a term of 18 months. 2. Unearned Sales Revenue $22,800: The company began selling magazine subscriptions on October 1, 2012, on an annual basis. The selling price of a subscription is $24. A review of subscription contracts reveals the following. Subscription Start Date Number of Subscriptions October 1 250 November 1 300 December 1 400 950 3. Notes Payable, $40,000: This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1. 4. Salaries Payable $0: There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $600 each per week, and three employees earn $700 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.

Instructions
Prepare the adjusting entries at December 31, 2012.

P4-6A
Open Road Travel Court was organized on July 1, 2011, by Tiffany Lampkins. Tiffany is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Tiffany prepared the following income statement for her fourth quarter, which ended June 30, 2012. OPEN ROAD TRAVEL COURT Income Statement For the Quarter Ended June 30, 2012 Revenues Rent revenues $212,000 Operating expenses Advertising $ 3,800 Salaries and wages 80,500 Utilities 900 Depreciation 2,700 Maintenance and repairs 4,300 Total operating expenses 92,200 Net income $119,800 Problems: Set A 211 (b) Net income $2,510 Tot. assets $23,430 Prepare adjusting entries. (SO 4, 5), AP Prepare adjusting entries and a corrected income statement. (SO 4, 5), AN Tiffany suspected that something was wrong with the statement because net income had never exceeded $30,000 in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data. You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at June 30, 2012. Supplies $ 8,200 Prepaid Insurance 14,400 Note Payable 14,000 You then make inquiries and discover the following. 1. Travel court rental revenues include advanced rental payments received for summer occupancy, in the amount of $57,000. 2. There were $1,800 of supplies on hand at June 30. 3. Prepaid insurance resulted from the payment of a one-year policy on April 1, 2012. 4. The mail in July 2012 brought the following bills: advertising for the week of June 24, $110; repairs made June 18, $4,450; and utilities for the month of June, $215. 5. There are three employees who receive wages that total $300 per day. At June 30, four days’ wages have been incurred but not paid. 6. The note payable is a 6% note dated May 1, 2012, and due on July 31, 2012. 7. Income tax of $13,400 for the quarter is due in July but has not yet been recorded.

Instructions
(a) Prepare any adjusting journal entries required at June 30, 2012. (b) Prepare a correct income statement for the quarter ended June 30, 2012. (c) Explain to Tiffany the generally accepted accounting principles that she did not recognize in preparing her income statement and their effect on her results.

P4-7A
On November 1, 2012, the following were the account balances of Tate Equipment Repair. Debits Credits Cash $ 2,790 Accumulated Depreciation—Equipment $ 500 Accounts Receivable 2,910 Accounts Payable 2,300 Supplies 1,120 Unearned Service Revenue 400 Equipment 10,000 Salaries and Wages Payable 620 Common Stock 10,000 Retained Earnings 3,000 $16,820 $16,820 During November, the following summary transactions were completed. Nov. 8 Paid $1,220 for salaries due employees, of which $600 is for November and $620 is for October salaries payable. 10 Received $1,800 cash from customers in payment of account. 12 Received $1,700 cash for services performed in November. 15 Purchased store equipment on account $3,600. 17 Purchased supplies on account $1,300. 20 Paid creditors $2,500 of accounts payable due. 22 Paid November rent $480. 25 Paid salaries $1,000. 27 Performed services on account and billed customers for services provided $900. 29 Received $750 from customers for services to be provided in the future. Adjustment data: 1. Supplies on hand are valued at $1,100. 2. Accrued salaries payable are $480. 3. Depreciation for the month is $250. 4. Unearned service revenue of $500 is earned. (b) Net income $33,285 Journalize transactions and follow through accounting cycle to preparation of financial statements. (SO 4, 5, 6), AP

Instructions
(a) Enter the November 1 balances in the ledger accounts. (Use T accounts.) (b) Journalize the November transactions. (c) Post to the ledger accounts. Use Service Revenue, Depreciation Expense, Supplies Expense, Salaries and Wages Expense, and Rent Expense. (d) Prepare a trial balance at November 30. (e) Journalize and post adjusting entries. (f ) Prepare an adjusted trial balance. (g) Prepare an income statement and a retained earnings statement for November and a classified balance sheet at November 30.

P4-8A
Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012. During July the following transactions were completed. July 1 Issued 12,000 shares of common stock for $12,000 cash. 1 Purchased used truck for $8,000, paying $2,000 cash and the balance on account. 3 Purchased cleaning supplies for $900 on account. 5 Paid $1,800 cash on 1-year insurance policy effective July 1. 12 Billed customers $3,700 for cleaning services. 18 Paid $1,000 cash on amount owed on truck and $500 on amount owed on cleaning supplies. 20 Paid $2,000 cash for employee salaries. 21 Collected $1,600 cash from customers billed on July 12. 25 Billed customers $2,500 for cleaning services. 31 Paid $290 for maintenance of the truck during month. 31 Declared and paid $600 cash dividend. The chart of accounts for Pro Window Washing contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation— Equipment, Accounts Payable, Salaries and Wages Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Maintenance and Repairs Expense, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense.

Instructions
(a) Journalize the July transactions. (b) Post to the ledger accounts. (Use T accounts.) (c) Prepare a trial balance at July 31. (d) Journalize the following adjustments. (1) Services provided but unbilled and uncollected at July 31 were $1,700. (2) Depreciation on equipment for the month was $180. (3) One-twelfth of the insurance expired. (4) An inventory count shows $320 of cleaning supplies on hand at July 31. (5) Accrued but unpaid employee salaries were $400. (e) Post adjusting entries to the T accounts. (f ) Prepare an adjusted trial balance. (g) Prepare the income statement and a retained earnings statement for July and a classified balance sheet at July 31. (h) Journalize and post closing entries and complete the closing process. (i) Prepare a post-closing trial balance at July 31. Problems: Set B

P4-1B
The following data are taken from the comparative balance sheets of Glenview Club, which prepares its financial statements using the accrual basis of accounting. December 31 2012 2011 Accounts receivable for member fees $12,000 $18,000 Unearned service revenue 17,000 11,000 Fees are billed to members based upon their use of the club’s facilities. Unearned service revenues arise from the sale of gift certificates, which members can apply to their future Problems: Set B 213 (f) Cash $1,840 Tot. adj. trial balance $22,680 (g) Net loss $ 1,030 Complete all steps in accounting cycle. (SO 4, 5, 6, 7, 8), AP (f) Cash $5,410 (g) Tot. assets $21,500 Record transactions on accrual basis; convert revenue to cash receipts. (SO 2, 4, 9), AP use of club facilities. The 2012 income statement for the club showed that service revenue of $172,000 was earned during the year.

Instructions
(Hint: You will find it helpful to use T accounts to analyze these data.) (a) Prepare journal entries for each of the following events that took place during 2012. 1. Fees receivable from 2011 were all collected during 2012. 2. Gift certificates outstanding at the end of 2011 were all redeemed during 2012. 3. An additional $40,000 worth of gift certificates were sold during 2012; a portion of these were used by the recipients during the year; the remainder were still outstanding at the end of 2012. 4. Fees for 2012 were billed to members. 5. Fees receivable for 2012 (i.e., those billed in item (4) above) were partially collected. (b) Determine the amount of cash received by the club with respect to fees during 2012.

P4-2B
Pamela Quinn started her own consulting firm, Quinn Consulting, on May 1, 2012. The trial balance at May 31 is as shown below. QUINN CONSULTING Trial Balance May 31, 2012 Debit Credit Cash $ 7,500 Accounts Receivable 3,000 Prepaid Insurance 3,600 Supplies 2,500 Equipment 12,000 Accounts Payable $ 3,500 Unearned Service Revenue 4,000 Common Stock 19,100 Service Revenue 7,500 Salaries and Wages Expense 4,000 Rent Expense 1,500 $34,100 $34,100 In addition to those accounts listed on the trial balance, the chart of accounts for Quinn Consulting also contains the following accounts: Accumulated Depreciation—Equipment, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense. Other data: 1. $750 of supplies have been used during the month. 2. Utility costs incurred but not paid are $260. 3. The insurance policy is for 2 years. 4. $1,500 of the balance in the Unearned Service Revenue account remains unearned at the end of the month. 5. Assume May 31 is a Thursday and employees are paid on Fridays. Quinn Consulting has two employees that are paid $600 each for a 5-day work week. 6. The equipment has a 5-year life with no salvage value and is being depreciated at $200 per month for 60 months. 7. Invoices representing $1,980 of services performed during the month have not been recorded as of May 31.

Instructions
(a) Prepare the adjusting entries for the month of May. (b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts. (c) Prepare an adjusted trial balance at May 31, 2012. (b) Cash received $184,000 Prepare adjusting entries, post to ledger accounts, and prepare an adjusted trial balance. (SO 4, 5, 6), AP (c) Tot. trial balance $37,500

P4-3B
Maquoketa Valley Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is presented here. MAQUOKETA VALLEY RESORT Trial Balance August 31, 2012 Debit Credit Cash $ 24,600 Prepaid Insurance 5,400 Supplies 4,300 Land 40,000 Buildings 132,000 Equipment 36,000 Accounts Payable $ 6,500 Unearned Rent Revenue 6,800 Mortgage Payable 120,000 Common Stock 100,000 Dividends 5,000 Rent Revenue 80,000 Salaries and Wages Expense 53,000 Utilities Expense 9,400 Maintenance and Repairs Expense 3,600 $313,300 $313,300 Other data: 1. Insurance expires at the rate of $450 per month. 2. A count of supplies on August 31 shows $700 of supplies on hand. 3. Annual depreciation is $6,600 on buildings and $4,000 on equipment. 4. Unearned rent of $5,000 was earned prior to August 31. 5. Salaries of $600 were unpaid at August 31. 6. Rentals of $1,600 were due from tenants at August 31. (Use Accounts Receivable.) 7. The mortgage interest rate is 9% per year. (The mortgage was taken out August 1.)

Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting entries. (c) Prepare an adjusted trial balance on August 31. (d) Prepare an income statement and a retained earnings statement for the 3 months ended August 31 and a classified balance sheet as of August 31. (e) Identify which accounts should be closed on August 31.

P4-4B
Vedula Advertising Agency was founded by Murali Vedula in January 2007. Presented here are both the adjusted and unadjusted trial balances as of December 31, 2012. VEDULA ADVERTISING AGENCY Trial Balance December 31, 2012 Unadjusted Adjusted Dr. Cr. Dr. Cr. Cash $ 11,000 $ 11,000 Accounts Receivable 16,000 19,500 Supplies 9,400 6,500 Prepaid Insurance 3,350 1,790 Equipment 60,000 60,000 Accumulated Depreciation— Equipment $ 25,000 $ 30,000 Notes Payable 8,000 8,000 Accounts Payable 2,000 2,000 Interest Payable 0 560 Problems: Set B 215 Prepare adjusting entries, adjusted trial balance, and financial statements. (SO 4, 5, 6, 7), AP (c) Tot. adj. trial balance $319,050 (d) Net income $11,500 Prepare adjusting entries and financial statements; identify accounts to be closed. (SO 4, 5, 6, 7), AP Unadjusted Adjusted Dr. Cr. Dr. Cr. 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
(a) Journalize the annual adjusting entries that were made. (b) Prepare an income statement and a retained earnings statement for the year ended December 31, and a classified balance sheet at December 31. (c) Identify which accounts should be closed on December 31. (d) If the note has been outstanding 10 months, what is the annual interest rate on that note? (e) If the company paid $10,500 in salaries in 2012, what was the balance in Salaries and Wages Payable on December 31, 2011?

P4-5B
A review of the ledger of Felipe Company at December 31, 2012, produces the following data pertaining to the preparation of annual adjusting entries. 1. Salaries and Wages Payable $0: There are eight salaried employees. Salaries are paid every Friday for the current week. Six employees receive a salary of $800 each per week, and two employees earn $600 each per week. Assume December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December. 2. Unearned Rent Revenue $300,000: The company began subleasing office space in its new building on November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31 the company had the following rental contracts that are paid in full for the entire term of the lease. Term Monthly Number Date (in months) Rent of Leases Nov. 1 6 $4,000 5 Dec. 1 6 7,500 4 3. Prepaid Advertising $13,200: This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as follows. Number of Magazine Contract Date Amount Issues A650 May 1 $6,000 12 B974 Sept. 1 7,200 18 The first advertisement runs in the month in which the contract is signed. 4. Notes Payable $80,000: This balance consists of a note for 1 year at an annual interest rate of 8%, dated April 1, 2012.

Instructions
Prepare the adjusting entries at December 31, 2012. Show all computations. (b) Net income $38,810 Tot. assets $68,790 Prepare adjusting entries. (SO 4, 5), AP

P4-6B
The Fly Right Travel Agency was organized on January 1, 2010, by Joe Kirkpatrick. Joe is a good manager but a poor accountant. From the trial balance prepared by a parttime bookkeeper, Joe prepared the following income statement for the quarter that ended March 31, 2012. FLY RIGHT TRAVEL AGENCY Income Statement For the Quarter Ended March 31, 2012 Revenues Service revenue $50,000 Operating expenses Advertising $ 2,600 Depreciation 400 Income tax 1,500 Salaries and wages 11,000 Utilities 400 15,900 Net income $34,100 Joe knew that something was wrong with the statement because net income had never exceeded $8,000 in any one quarter. Knowing that you are an experienced accountant, he asks you to review the income statement and other data. You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at March 31, 2012. Supplies $ 2,900 Prepaid insurance 3,360 Notes payable 12,000 You then make inquiries and discover the following: 1. Travel service revenue includes advance payments for cruises, $20,000. 2. There were $800 of supplies on hand at March 31. 3. Prepaid insurance resulted from the payment of a one-year policy on January 1, 2012. 4. The mail on April 1, 2012, brought the utility bill for the month of March’s heat, light, and power, $210. 5. There are two employees who receive salaries of $80 each per day. At March 31, four days’ salaries have been incurred but not paid. 6. The note payable is a 6-month, 7% note dated January 1, 2012.

Instructions
(a) Prepare any adjusting journal entries required at March 31, 2012. (b) Prepare a correct income statement for the quarter ended March 31, 2012. (c) Explain to Joe the generally accepted accounting principles that he did not recognize in preparing his income statement and their effect on his results.

P4-7B
On September 1, 2012, the following were the account balances of Worthington Equipment Repair. Debits Credits Cash $ 4,880 Accumulated Depreciation—Equipment $ 1,600 Accounts Receivable 3,420 Accounts Payable 3,100 Supplies 800 Unearned Service Revenue 400 Equipment 15,000 Salaries and Wages Payable 700 Common Stock 10,000 Retained Earnings 8,300 $24,100 $24,100 During September, the following summary transactions were completed. Sept. 8 Paid $1,100 for salaries due employees, of which $400 is for September and $700 is for August salaries payable. 10 Received $1,500 cash from customers in payment of account. 12 Received $3,400 cash for services performed in September. 15 Purchased store equipment on account $3,000. Problems: Set B 217 Prepare adjusting entries and a corrected income statement. (SO 4, 5), AN (b) Net income $10,100 Journalize transactions and follow through accounting cycle to preparation of financial statements. (SO 4, 5, 6), AP Sept. 17 Purchased supplies on account $2,000. 20 Paid creditors $4,500 of accounts payable due. 22 Paid September rent $520. 25 Paid salaries $1,200. 27 Performed services on account and billed customers for services provided $2,040. 29 Received $650 from customers for services to be provided in the future. Adjustment data: 1. Supplies on hand $1,100. 2. Accrued salaries payable $400. 3. Depreciation $200 per month. 4. Unearned service revenue of $280 earned.

Instructions
(a) Enter the September 1 balances in the ledger T accounts. (b) Journalize the September transactions. (c) Post to the ledger T accounts. Use Service Revenue, Depreciation Expense, Supplies Expense, Salaries and Wages Expense, and Rent Expense. (d) Prepare a trial balance at September 30. (e) Journalize and post adjusting entries. (f ) Prepare an adjusted trial balance. (g) Prepare an income statement and a retained earnings statement for September and a classified balance sheet at September 30.

P4-8B
Gina Balistrieri opened Genie Cleaners on March 1, 2012. During March, the following transactions were completed. Mar. 1 Issued 10,000 shares of common stock for $15,000 cash. 1 Purchased used truck for $8,000, paying $3,000 cash and the balance on account. 3 Purchased cleaning supplies for $1,500 on account. 5 Paid $2,400 cash on a 6-month insurance policy effective March 1. 14 Billed customers $3,700 for cleaning services. 18 Paid $1,500 cash on amount owed on truck and $500 on amount owed on cleaning supplies. 20 Paid $1,750 cash for employee salaries. 21 Collected $1,600 cash from customers billed on March 14. 28 Billed customers $4,200 for cleaning services. 31 Paid $350 for gas and oil used in truck during month (use Maintenance and Repairs Expense). 31 Declared and paid a $900 cash dividend. The chart of accounts for Genie Cleaners contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Salaries and Wages Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Maintenance and Repairs Expense, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense.

Instructions
(a) Journalize the March transactions. (b) Post to the ledger accounts. (Use T accounts.) (c) Prepare a trial balance at March 31. (d) Journalize the following adjustments. 1. Earned but unbilled revenue at March 31 was $200. 2. Depreciation on equipment for the month was $250. 3. One-sixth of the insurance expired. 4. An inventory count shows $280 of cleaning supplies on hand at March 31. 5. Accrued but unpaid employee salaries were $1,080. (e) Post adjusting entries to the T accounts. (f ) Prepare an adjusted trial balance. (g) Prepare the income statement and a retained earnings statement for March and a classified balance sheet at March 31. (h) Journalize and post closing entries and complete the closing process. (i) Prepare a post-closing trial balance at March 31. (f) Tot. adj. trial balance $30,590 (g) Tot. assets $24,370 Complete all steps in accounting cycle. (SO 4, 5, 6, 7, 8), AP (f) Tot. adj. trial balance $28,930 (g) Tot. assets $22,730 Problems: Set C Visit the book’s companion website, at www.wiley.com/college/kimmel, and choose the Student Companion site to access Problem Set C. Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 3.) CCC4 Cookie Creations is gearing up for the winter holiday season. During the month of December 2011, the following transactions occur. Dec. 1 Natalie hires an assistant at an hourly wage of $8 to help with cookie making and some administrative duties. 5 Natalie teaches the class that was booked on November 25. The balance outstanding is received. 8 Cookie Creations receives a check for the amount due from the neighborhood school for the class given on November 30. 9 Cookie Creations receives $750 in advance from the local school board for five classes that the company will give during December and January. 15 Pays the cell phone invoice outstanding at November 30. 16 Issues a check to Natalie’s brother for the amount owed for the design of the website. 19 Receives a deposit of $60 on a cookie class scheduled for early January. 23 Additional revenue earned during the month for cookie-making classes amounts to $4,000. (Natalie has not had time to account for each class individually.) $3,000 in cash has been collected and $1,000 is still outstanding. (This is in addition to the December 5 and December 9 transactions.) 23 Additional baking supplies purchased during the month for sugar, flour, and chocolate chips amount to $1,250 cash. 23 Issues a check to Natalie’s assistant for $800. Her assistant worked approximately 100 hours from the time in which she was hired until December 23. 28 Pays a dividend of $500 to the common shareholder (Natalie). As of December 31, Cookie Creations’ year-end, the following adjusting entry data are provided. 1. A count reveals that $45 of brochures and posters were used. 2. Depreciation is recorded on the baking equipment purchased in November. The baking equipment has a useful life of 5 years. Assume that 2 months’ worth of depreciation is required. 3. Amortization (which is similar to depreciation) is recorded on the website. (Credit the Website account directly for the amount of the amortization.) The website is amortized over a useful life of 2 years and was available for use on December 1. 4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued during November and December.) Round to nearest dollar. 5. One month’s worth of insurance has expired. 6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neighborhood community center on December 31. In early January Cookie Creations sends an invoice for $450 to the community center. 7. A count reveals that $1,025 of baking supplies were used. 8. A cell phone invoice is received for $75. The invoice is for services provided during the month of December and is due on January 15. 9. Because the cookie-making class occurred unexpectedly on December 28 and is for such a large group of children, Natalie’s assistant helps out. Her assistant worked 7 hours at a rate of $8 per hour. 10. An analysis of the unearned revenue account reveals that two of the five classes paid for by the local school board on December 9 still have not been taught by the end of December. The $60 deposit received on December 19 for another class also remains unearned.

Instructions
Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 3, plus the new information above, do the following. (a) Journalize the above transactions. (b) Post the December transactions. (Use the general ledger accounts prepared in Chapter 3.) Continuing Cookie Chronicle 219 (c) Prepare a trial balance at December 31, 2011. (d) Prepare and post adjusting journal entries for the month of December. (e) Prepare an adjusted trial balance as of December 31, 2011. (f ) Prepare an income statement and a retained earnings statement for the 2-month period ending December 31, 2011, and a classified balance sheet as of December 31, 2011. (g) Prepare and post closing entries as of December 31, 2011. (h) Prepare a post-closing trial balance.