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Principles of Accounting, Volume 1: Financial Accounting

Problem Set B

Principles of Accounting, Volume 1: Financial AccountingProblem Set B
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PB 1.

LO 4.1Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.

  1. expense now, pay now
  2. expense later, pay now
  3. expense now, pay later
PB 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. issued stock for cash $20,000
  2. purchased supplies inventory on account $1,800
  3. paid employee salaries; assume it was current day’s expenses $950
  4. paid note payment to bank (principal only) $1,200
  5. collected balance on accounts receivable $4,750
PB 3.

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

  1. fees earned and billed, but not collected
  2. recorded depreciation expense
  3. fees collected in advance of services
  4. salaries owed but not yet paid
  5. property rentals costs, prepaid for future months
  6. inventory purchased for cash
PB 4.

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

  1. Salaries Payable
  2. Interest Receivable
  3. Unearned Fee Revenue
  4. Prepaid Rent
PB 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 Rent adjusted from $15,000 to $9,500    
B. Recorded salaries payable of $3,750    
C. Prepaid Rent adjusted from $6,000 to $4,000    
D. Recorded depreciation expense of $5,500    
Table 4.7
PB 6.

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

  1. recorded accrued interest on note payable
  2. adjusted unearned rent to correct
  3. recorded depreciation for the year
  4. adjusted salaries payable to correct
  5. sold merchandise to customers on account
PB 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, $195,000
  • Accumulated depreciation, beginning of year, $26,000
  • Current year depreciation, $13,000
PB 8.

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

Unearned Fee Revenue: T-Account Balance 12,000, Correct Balance 9,000. Supplies: T-Account Balance 3,200, Correct Balance 1,050. Interest Payable: T-Account Balance 1,850, Correct Balance 1,975.
PB 9.

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: T-Account Balance 12,000, Correct Balance 5,000. Taxes Payable: T-Account Balance 8,850, Correct Balance 9,900. Unearned Rental Revenue: T-Account Balance 6,000, Correct Balance 2,000.
PB 10.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Supplies, post any entries that affect the account, and tally ending balance for the account (assume Supplies beginning balance of $6,550).

  1. January 26, purchased additional supplies for cash, $9,500
  2. December 31, actual count of supplies, $8,500
PB 11.

LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Unearned Revenue, post any entries that affect the account, tally ending balance for the account (assume Unearned Revenue beginning balance of $12,500).

  1. May 1, collected an advance payment from client, $15,000
  2. December 31, remaining unearned advances, $7,500
PB 12.

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

Insurance Expense, Debit 31,000. Debit balance, 31,000. Prepaid Insurance, Debit 9,000. Debit Balance 9,000.
PB 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: Buildings and Equipment 250,000; Prepaid Advertising 6,400. Credits: Accumulated Depreciation 56,000; Unearned Rental Revenue 8,900; Interest Payable 3,500.
  1. depreciation on buildings and equipment, $17,500
  2. advertising still prepaid at year end, $2,200
  3. interest due on notes payable, $4,300
  4. unearned rental revenue, $6,900
  5. interest receivable on notes receivable, $1,200
PB 14.

LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Dividends (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation.

Accounts Payable 9,000; Accounts Receivable 16,032; Cash 20,450; Common Stock 24,000; Dividends ?; Equipment 29,000; Prepaid Insurance 9,444; Land 34,000; Notes Payable 8,000; Retained Earnings 31,315; Insurance Expense 12,689; Service Revenue 82,500; Supplies 9,700; Salaries Expense 51,500.
PB 15.

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

Accounts Payable 3,600; Accounts Receivable 45,333; Building 156,000; Cash 50,480; Common Stock 110,000; Dividends 18,000; Equipment 33,500; Fees Earned Revenue 225,430; Land 18,000; Supplies Expense 5,123; Notes Payable 85,500; Retained Earnings 60,606; Salaries Expense 151,900; Supplies 6,800.

Adjustments needed:

  • Physical count of supplies inventory remaining at end of period, $3,300
  • Customer fees collected in advance (payments were recorded as Fees Earned), $18,500
PB 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).

Accounts Payable 18,000; Accounts Receivable 4,000; Investments 88,000; Cash 19,000; Common Stock 30,000; Dividends 16,000; Prepaid Insurance 20,000; Insurance Expense 8,000; Land 26,000; Notes Payable (long term) 55,000; Salaries Expense 37,000; Sales Revenue 115,000.

Adjustments needed:

  • Accrued interest revenue on investments at period end, $2,200
  • Insurance still unexpired at end of the period, $12,000
PB 17.

LO 4.5Using the following Company X information, prepare a Retained Earnings Statement:

  • Retained earnings balance January 1, 2019, $121,500
  • Net income for year 2019, $145,800
  • Dividends declared and paid for year 2019, $53,000
PB 18.

LO 4.5From the following Company Z 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 54,650; Accounts Receivable 28,750; Prepaid Insurance 8,000; Land 22,000; Dividends 36,000; Insurance Expense 32,000; Salaries Expense 126,500; Miscellaneous Expense 56,900; Total Debits 364,800. Credit Accounts: Accounts Payable 14,300; Salaries Payable 4,250; Common Stock 50,000; Retained Earnings 38,900; Service Revenue 257,350; Total Credits 364,800.
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