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Exam 3: Accrual Basis of Accounting

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Question 51

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Communications, Inc. had the following separate situations occur during 2019. The company's accountant is preparing the annual financial statements at December 31, 2019 and has asked you to prepare the adjusting entries for each situation using the journal entry form. a. On June 1, 2019, Communications, Inc. paid the annual lease amount on its warehouse space. The annual lease is $19,800 and was recorded by debiting Prepaid Rent and crediting Cash. No adjusting entries have been prepared since June 1, 2019. b. The Unearned Revenue account has an unadjusted balance of $12,000 consisting of gift cards sold to customers. Redeemed gift cards that have not yet been recorded total $3,600. c. The company has not yet received a bill for utilities nor paid for the month of December. The expense is estimated to be $2,520. d. On December 1, 2019, Communications, Inc., received $4,500 cash from a customer related to a special order. The special order was delivered to the customer on December 29 but no entry has been made to record the delivery. e. At December 31, 2019, employee wages of $6,900 have been incurred but not paid or recorded. f. At December 31, 2019, $1,320 of interest has been incurred, but not yet paid or recorded. g. Unrecorded depreciation on equipment is $8,400.

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Question 52

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Use Oma Bean Corporation's adjusted trial balance to prepare entries to close Oma Bean's temporary accounts (using Retained Earnings), in journal entry form.

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Question 53

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Guinea Pigs R Us magazine company's Unearned Revenue account had a balance of $25,400 on January 1, 2019. On December 31, 2019, as part of the adjusting entry, they recognized Subscription revenue of $29,600. The December 31, 2019 balance of the Unearned Revenue account was $24,600. What must have been the amount of cash received by the Guinea Pigs R Us magazine company from customers during the year 2019?

The publisher of Entrepreneur Today, a monthly business magazine, received $23,400 for three-year subscriptions on January 1, 2019. a. What entry would be made to record the cash receipt on January 1, 2019? b. What entry should be made before the financial statements are prepared for the month ending January 31, 2019?

A completed worksheet contains sufficient information to prepare an income statement and a balance sheet.

Listed below are selected accounts for Benson Company, Inc. Place an X in the proper column to indicate whether, at the end of the accounting period, the account is (1) closed to the Income Summary account; (2) closed to the Retained Earnings; or (3) not closed.

Lucky Company obtained a $50,000, one-year, 12 percent bank loan on November 1 of the current year. Interest is payable at the end of the loan term. The company's adjusting entry needed on December 31 is:

Wisconsin Candy Company has a policy of paying for all its utilities one month after they receive the bills. In its Utilities Payable account, Wisconsin Candy Company reported $282,000 on January 1, 2019, and $336,000 on December 31, 2019. If cash paid for utilities during the year 2019 was $1,638,000, what was Wisconsin Candy Company's Utilities Expense for the year 2019?

Purrfect Cat Condos provides pet grooming and boarding services for domestic cats. The company has been in existence for 12 years. At December 31, 2019, Purrfect Cat Condos' adjusted trial balance is as follows: a. Prepare closing entries in journal entry form, using the Income Summary account. b. After Purrfect Cat Condos' closing entries are posted, what is the balance in the Retained Earnings account? c. Prepare Purrfect Cat Condos' post-closing trial balance.

At the beginning of the period, Kitty Treats Corporation had $2,400 of supplies on hand. During the period, it purchased $5,400 of supplies and at the end of the period, the company determined that only $4,800 of supplies were still on hand. What adjusting entry should Kitty Treats Corporation make at the end of the period?

Swiss Chocolate Company has a policy of paying for all its utilities one month after they receive the bills. In its Utilities Payable account, Swiss Chocolate reported $94,000 on January 1, 2019, and $112,000 on December 31, 2019. If cash paid for utilities during the year 2019 was $546,000, what was Swiss Chocolate Company's Utilities Expense for the year 2019?

Navarro's Kitchen's restaurant closes its accounts on December 31 each year, using the Retained Earnings account. On December 31, 2019, Navarro's Kitchen's accrued interest income total $1,880 that was earned on a $80,000 investment but not yet received or recorded. Prepare journal entries to: a. Accrue the interest earned on December 31, 2019. b. Close the Interest Income account on December 31, 2019. (The Interest Income account has a year-end balance of $5,800 after adjustments).

Gustav Schulze Realtors always collects rent in advance from its customers. The 2019 income statement for Gustav reports rent revenue of $42,000. Assume all rent is paid in cash. The related balance sheet accounts for the beginning and end of the year were: Based on this information, the amount of cash collected during 2019 from Gustav's customers was:

The Boston Company's Supplies account balance at the end of the period is $44,000. Supplies totaling $37,600 have been purchased during the period and debited to Supplies. A physical count shows $10,000 worth of supplies on hand at the end of the period. The proper adjusting entry is:

As of the beginning of 2019, the Logistics Company had equipment totaling $1,800,000 which was depreciated at $150,000 per year. If Let's Move makes the appropriate adjusting entry at year end, which of the following is one part of the journal entry that will be made?

Great Value Co-Op recognizes membership fee revenues over the term of the membership, which is 12 months. If their Unearned Membership Fee Revenue account had a balance of $1,200 million on January 31, 2019, and $1,100 million on January 31, 2020 and the company received membership fees in cash of $2,200 million during the year, what amount was recognized as Membership Fee Revenue for the fiscal year?

During the current accounting period, Kenyon Farms Company paid $2,000 for advertising services in advance of receiving them. Prepaid Advertising was debited and Cash was credited for $2,000. At the end of the accounting period, three-fourths of the services paid for had been received. The proper adjusting entry is:

On a worksheet, a net loss appears in the income statement as a credit and in the balance sheet columns as a debit.

Use Oma Bean Corporation's adjusted trial balance to prepare Oma Bean's statement of stockholders' equity for 2019. There were no stock issuances or repurchases during 2019.

The following entry closes the Depreciation Expense account at the end of the accounting period: