Acct301 Essentials of Accounting: Week 2 Assignment - Fall B, 2014 (E3-7, E3-8, P3-3A, P3-5A)

Acct301 Essentials of Accounting
Week 2 Assignment (Fall B, 2014)

Exercise 3-7 Analyzing and preparing adjusting entries
Following are two income statements for Alexis Co. for the year ended December 31. The left column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts.
Income Statements
For Year Ended December 31
Unadjusted Adjusted
Fees earned 24,000 30,000
Commissions earned 42,500 42,500
Total revenues 66,500 72,500
Depreciation expense—Computers - 1,500
Depreciation expense—Office furniture - 1,750
Salaries expense 12,500 14,950
Insurance expense - 1,300
Rent expense 4,500 4,500
Office supplies expense - 480
Advertising expense 3,000 3,000
Utilities expense 1,250 1,320
Total expenses 21,250 28,800
Net income $45,250 $43,700

Analyze the statements and prepare the eight adjusting entries that likely were recorded. (Note: 30% of the $6,000 adjustment for Fees Earned has been earned but not billed, and the other 70% has been earned by performing services that were paid for in advance.)

Exercise 3-8 Determining assets and expenses for accrual and cash accounting
On June 1, 2011, a company paid a $20,700 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table.

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements
[The following information applies to the questions displayed below.]
Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2013, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items A through H that require adjusting entries on December 31, 2013, follow.
Unadjusted Trial Balance
December 31, 2013
Debit Credit
Cash 34,000
Accounts receivable -
Teaching supplies 8,000
Prepaid insurance 12,000
Prepaid rent 3,000
Professional library 35,000
Accumulated depreciation-Professional library 10,000
Equipment 80,000
Accumulated depreciation-Equipment 15,000
Accounts payable 26,000
Salaries payable -
Unearned training fees 12,500
T. Wells, Capital 90,000
T. Wells, Withdrawals 50,000
Tuition fees earned 123,900
Training fees earned 40,000
Depreciation expense-Professional library -
Depreciation expense-Equipment -
Salaries expense 50,000
Insurance expense -
Rent expense 33,000
Teaching supplies expense -
Advertising expense 6,000
Utilities expense 6,400
Totals $317,400 $317,400

Additional Information Items
a. An analysis of WTI's insurance policies shows that $2,400 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,800 are available at year-end 2013.
c. Annual depreciation on the equipment is $13,200.
d. Annual depreciation on the professional library is $7,200.
e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,500, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2014.
f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
g. WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.

1. Offline requirement: Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end.(Omit the "$" sign in your response.)
3. Offline requirement: Post the adjustment entries to the T-accounts.
4. Prepare an adjusted trial balance. (Use the updated balances from the T-accounts. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
5. Prepare Wells Technical Institute's income statement as of December 31, 2013. (Omit the "$" sign in your response.)
6. Prepare Wells Technical Institute's statement of owner's equity for the year 2013. (Input all amounts as positive values. Omit the "$" sign in your response.)
7. Prepare Wells Technical Institute's balance sheet as of December 31, 2013. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values. Omit the "$" sign in your response.)

Problem 3-5A Preparing financial statements from the adjusted trial balance and calculating profit margin
[The following information applies to the questions displayed below.]
The adjusted trial balance for Chiara Company as of December 31, 2013, follows.
Debit Credit
Cash 30,000
Accounts receivable 52,000
Interest receivable 18,000
Notes receivable (due in 90 days) 168,000
Office supplies 16,000
Automobiles 168,000
Accumulated depreciation-Automobiles 50,000
Equipment 138,000
Accumulated depreciation-Equipment 18,000
Land 78,000
Accounts payable 96,000
Interest payable 20,000
Salaries payable 19,000
Unearned fees 30,000
Long-term notes payable 138,000
R. Chiara, Capital 255,800
R. Chiara, Withdrawals 46,000
Fees earned 484,000
Interest earned 24,000
Depreciation expense-Automobiles 26,000
Depreciation expense-Equipment 18,000
Salaries expense 188,000
Wages expense 40,000
Interest expense 32,000
Office supplies expense 34,000
Advertising expense 58,000
Repairs expense-Automobiles 24,800
Totals $1,134,800 $1,134,800

1. Prepare Chiara Company's income statement for the year ended December 31, 2013. (Omit the $ sign in your response.)
2. Prepare Chiara Company's statement of owner's equity for the year ended December 31, 2013. (Input all amounts as positive values. Omit the $ sign in your response. )
3. Prepare Chiara Company's balance sheet as of December 31, 2013. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values. Omit the $ sign in your response.)
4. Calculate the profit margin for year 2013. (Omit the % sign, which is provided for you. Round your answer to 1 decimal place.)
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