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Principles of Accounting, Volume 1: Financial Accounting

Problem Set A

Principles of Accounting, Volume 1: Financial AccountingProblem Set A
PA 1.

LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.

  1. earn now, collect now
  2. earn now, collect later
  3. earn later, collect now
PA 2.

LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.

  1. paid balance due for accounts payable $6,900
  2. charged clients for legal services provided $5,200
  3. purchased supplies on account $1,750
  4. collected legal service fees from clients for current month $3,700
  5. issued stock in exchange for a note payable $10,000
PA 3.

LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, deferred expense, or estimate.

  1. utilities owed but not paid
  2. cash received in advance for future services
  3. supplies inventory purchased
  4. fees earned but not yet collected
  5. depreciation expense recorded
  6. insurance paid for future periods
PA 4.

LO 4.2Identify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.

  1. accounts receivable
  2. interest payable
  3. prepaid insurance
  4. unearned rent
PA 5.

LO 4.2Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).

 
    Impact 1 Impact 2
A. Unearned Fees adjusted from $7,000 to $5,000    
B. Recorded depreciation expense of $12,000    
C. Prepaid Insurance adjusted from $18,500 to $6,300    
D. Supplies account balance $500, actual count $220    
Table 4.6
PA 6.

LO 4.2What two accounts are affected by each of these adjustments?

  1. billed customers for services provided
  2. adjusted prepaid insurance to correct
  3. recorded depreciation expense
  4. recorded unpaid utility bill
  5. adjusted supplies inventory to correct
PA 7.

LO 4.3Using the following information:

  1. make the December 31 adjusting journal entry for depreciation
  2. determine the net book value (NBV) of the asset on December 31
  • Cost of asset, $250,000
  • Accumulated depreciation, beginning of year, $80,000
  • Current year depreciation, $25,000
PA 8.

LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.

Prepaid Insurance: $26,000 T-Account Balance, $14,000 Correct Balance. Salaries Payable: $5,500 T-Account Balance, $6,200 Correct Balance. Unearned Rental Revenue: $8,000 T-Account Balance, $1,600 Correct Balance.
PA 9.

LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries.

Unearned Service Revenue: $24,000 T-Account Balance, $10,500 Correct Balance. Supplies: $8,500 T-Account Balance, $2,600 Correct Balance. Interest Payable: $2,400 T-Account Balance, $2,000 Correct Balance.
PA 10.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Interest Payable, post any entries that affect the account, and tally the ending balance for the account (assume Interest Payable beginning balance of $2,500).

  1. March 1, paid interest due on note, $2,500
  2. December 31, interest accrued on note payable, $4,250
PA 11.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Prepaid Insurance, post any entries that affect the account, and tally the ending balance for the account (assume Prepaid Insurance beginning balance of $9,000).

  1. April 1, paid cash for one-year policy, $18,000
  2. December 31, unexpired premiums, $4,500
PA 12.

LO 4.3Determine the amount of cash expended for Salaries during the month, based on the entries in the following accounts (assume 0 beginning balances).

Salaries Expense, Debit 55,000. Debit Balance 55,000. Salaries Payable, Credit 6,000. Credit Balance 6,000.
PA 13.

LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.

Excerpt from Unadjusted Trial Balance. Debits: Property Plant and Equipment 320,000; Prepaid Insurance 24,000; Supplies 7,500. Credits: Accumulated Depreciation 89,500; Unearned Service Revenue 3,000.
  1. supplies actual count at year end, $6,500
  2. remaining unexpired insurance, $6,000
  3. remaining unearned service revenue, $1,200
  4. salaries owed to employees, $2,400
  5. depreciation on property plant and equipment, $18,000
PA 14.

LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Cash (assume accounts have normal balances).

Accounts Payable 19,000; Accounts Receivable 23,760; Cash ?; Common Stock 38,000; Dividends 9,000; Equipment 20,000; Prepaid Insurance 21,466; Land 45,000; Notes Payable 61,000; Retained Earnings 18,815; Insurance Expense 19,689; Service Revenue 90,550; Supplies 5,250; Salaries Expense 51,000.
PA 15.

LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.

Accounts Payable 9,500; Accounts Receivable 14,260; Cash 22,222; Common Stock 30,000; Dividends 5,000; Equipment 12,000; Prepaid Insurance 25,444; Land 20,000; Notes Payable 26,000; Retained Earnings 12,815; Insurance Expense 12,689; Service Revenue 89,550; Supplies 2,750; Salaries Expense 53,500.

Adjustments needed:

  • Salaries due to employees, but unpaid at the end of the period, $2,000
  • Insurance still unexpired at end of the period, $12,000
PA 16.

LO 4.4Prepare an adjusted trial balance from the following account information, and also considering the adjustment data provided (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.

Accounts Payable 26,000; Accounts Receivable 8,000; Cash 29,000; Common Stock 33,000; Dividends 9,000; Equipment 68,000; Notes Payable (due next month) 29,000; Salaries Expense 42,000; Salaries Payable 2,000; Service Revenue 75,000; Supplies 5,000; Transportation Expense 4,000.

Adjustments needed:

  • Remaining unpaid Salaries due to employees at the end of the period, $0
  • Accrued Interest Payable at the end of the period, $7,700
PA 17.

LO 4.5Using the following Company W information, prepare a Retained Earnings Statement.

  • Retained earnings balance January 1, 2019, $43,500
  • Net income for year 2019, $55,289
  • Dividends declared and paid for year 2019, $18,000
PA 18.

LO 4.5From the following Company Y adjusted trial balance, prepare simple financial statements, as follows:

  1. Income Statement
  2. Retained Earnings Statement
  3. Balance Sheet
Adjusted Trial Balance. Debit Accounts: Cash 32,000; Accounts Receivable 17,300; Prepaid Insurance 6,400; Land 10,000; Dividends 8,000; Insurance Expense 5,600; Salaries Expense 24,000; Miscellaneous Expense 22,800; Total Debits 126,100. Credit Accounts: Accounts Payable 10,900; Salaries Payable 6,000; Common Stock 31,000; Retained Earnings 4,200; Service Revenue 74,000; Total Credits 126,100.
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