Acc421 Intermediate Accounting: Week 2 Team Assignment (P3-5 and P3-10)

Acc421 Intermediate Accounting
Week 2 Team Assignment (P3-5 and P3-10)

P3-5 (Adjusting Entries)
The accounts listed below appeared in the December 31 trial balance of the Savard Theater.
Debit Credit
Equipment 192,000
Accumulated Depreciation—Equipment 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries Expense 57,600
Interest Expense 1,400

Instructions
(a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
1. The equipment has an estimated life of 16 years and a salvage value of $24,000 at the end of that time. (Use straight-line method.)
2. The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.)
3. In December 2,000 coupon admission books were sold at $30 each. They could be used for admission any time after January 1.
4. Advertising expense paid in advance and included in Advertising Expense $1,1005. Salaries accrued but unpaid $4,700.

(b) What amounts should be shown for each of the following on the income statement for the year?
1. Interest expense.
2. Admissions revenue.
3. Advertising expense.
4. Salaries expense.


P3-10 (Adjusting and Closing)
Presented below is the December 31 trial balance of New York Boutique.
NEW YORK BOUTIQUE
TRIAL BALANCE
December 31
Debit Credit
Cash 18,500
Accounts Receivable 32,000
Allowance for Doubtful Accounts 700
Inventory, December 31 80,000
Prepaid Insurance 5,100
Equipment 84,000
Accumulated Depreciation - Equipment 35,000
Notes Payable 28,000
Common Stock 80,600
Retained Earnings 10,000
Sales Revenue 600,000
Cost of Goods Sold 408,000
Salaries and Wages (Sales) 50,000
Advertising Expense 6,700
Salaries and Wages (Administrative) 65,000
Supplies Expense 5,000
$754,300 $754,300

Instructions:
a. Construct T-accounts and enter balances shown.
b. Prepare adjusting journal entries for the following and post to the T-Accounts
1. Bad debt expense is estimated to be $1,400.
2. Equipment is depreciated based on a 7-year life (no salvage value).
3. Insurance expired during the year $2,550.
4. Interest accrued on notes payable $3,360.
5. Sales salaries and wages earned but not paid $2,400.
6. Advertising paid in advance $700.
7. Office supplies on hand $1,500, charged to Supplies Expense when purchased.
c. Prepare closing entries and post to the accounts.
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