Question 1
(10 marks)
Ace Accounting’s controller, John Ace, hired an assistant, Annette Black. While guiding her in financial statement preparations, John Ace encountered opposition from Annette Black. She disagreed with making an adjusting journal entry at December 31 year end to accrue staff bonuses, as the bonuses were not paid. She wanted to wait until the staff bonuses were paid in February to record the bonuses. Her reasoning was that the results would be identical.
Required:
Write a business memo to explain to Annette Black why the adjusting journal entry to accrue the staff bonuses is or is not required.
The format of the business memo should be the following:
DATE: (fill in)
TO: (fill in)
FROM: (fill in)
SUBJECT: Why the adjusting journal entry for staff bonuses is or is not required
Question 2
(10 marks)
Jane’s Technically Correct, a proprietorship, had a December 31 year end.
Required:
Record the initial and subsequent transaction for each of the following independent situations using the numerals to group the transaction:
December 31: A year-end adjusting journal entry is required to update the balance.
February 28: A journal entry is required to record receipt of payment.
December 31: Jane counted the office supplies and noted that there was $ 6,000 supplies on hand. Thus, the balance needs to be updated.
October 01: Jane’s Technically Correct needs to adjust the prepaid account.
Question 3
(50 marks)
Bob’s Best Ads, a proprietorship created by Bob Best, did consulting work relating to commercials for television and ads for newspapers. Bob’s Best Ads prepared the following financial statement:
Bob’s Best Ads |
||
Unadjusted Trial Balance |
||
December 01, 2018 |
||
ACCOUNT |
DEBIT |
CREDIT |
Cash |
$ 32,000 |
|
Accounts Receivable |
30,000 |
|
Supplies |
4,000 |
|
Prepaid Advertising |
20,000 |
|
Computer Equipment |
60,000 |
|
Accumulated Amortization, Computer Equipment |
$ 0 |
|
Furniture |
100,000 |
|
Accumulated Amortization, Furniture |
0 |
|
Accounts Payable |
40,000 |
|
Salaries Payable |
8,000 |
|
Unearned Revenue |
15,000 |
|
Bob Best, Capital |
130,000 |
|
Bob Best, Withdrawals |
50,000 |
|
Consulting Revenue |
286,000 |
|
Advertising Expense |
70,000 |
|
Entertainment Expense |
23,000 |
|
Salaries Expense |
90,000 |
|
Total |
$ 479,000 |
$ 479,000 |
In December 2018, the following transactions occurred:
Required:
Question 4
(30 marks)
Golden Designs incurred the following 2018 transactions:
Required:
By comparing the balances in requirem
Question 1(Answer):
DATE: 08/02/2020
TO:Annette Black
FROM: John Ace
SUBJECT: Why the adjusting journal entry for staff bonuses is required.
Dear Annette,
I would like to clear some concepts in "Accrual Method" of accounting so that it will help you to understand why adjusting journal entry is required for staff bonuses as on 31st December (Year End).
Accrual Method of accounting says that we have to book all the expenses and incomes during the year without taking into regard actual payments or receipts of expenses and income. This method shows us the actual position of business whether we are in Profit or loss as all the expenses and income are booked on accrual basis.
There is another accouting method which is "Cash Basis" in which we book all the expenses and losses on actual payment and receipt basis.
As our company is following Accrual Method of accounting, the bonuses to staff is related to current year and are accrued as on 31st december, hence we will have to pass the journal entry to book this expenses in our financial statement. This bonus expense is relating to this accounting year hence to view correct position of our business we will have to pass this journal entry.
Hope that your doubt regarding this concept is clear. If any other questions please don't hestitate to confront me.
Regards,
Annette Black
Question 1 (10 marks) Ace Accounting’s controller, John Ace, hired an assistant, Annette Black. While guiding...
Question 3 (50 marks) Bob’s Best Ads, a proprietorship created by Bob Best, did consulting work relating to commercials for television and ads for newspapers. Bob’s Best Ads prepared the following financial statement: Bob’s Best Ads Unadjusted Trial Balance December 01, 2018 ACCOUNT DEBIT CREDIT Cash $ 32,000 Accounts Receivable 30,000 Supplies 4,000 Prepaid Advertising 20,000 Computer Equipment 60,000 Accumulated Amortization, Computer Equipment $ 0 Furniture 100,000 Accumulated Amortization, Furniture 0 Accounts Payable 40,000 Salaries Payable 8,000 Unearned Revenue 15,000...
Question 2 (10 marks) Jane’s Technically Correct, a proprietorship, had a December 31 year end. Required: Record the initial and subsequent transaction for each of the following independent situations using the numerals to group the transaction: June 01: Jane’s Technically Correct received $ 24,000 for a 12-month service contract. December 31: A year-end adjusting journal entry is required to update the balance. January 13: Jane’s Technically Correct did $ 10,000 software updates for a client. Payment will be received at...
Question 4 (30 marks) Golden Designs incurred the following 2018 transactions: November 01: Paid $ 60,000 to place an ad for 4 months on the internet. December 01: Received $ 100,000 cash payment to produce a monthly coin for the next 5 months. Required: Open T-accounts for Prepaid Advertising, Advertising Expense, Unearned Revenue, and Revenue. Prepare a journal entry that would debit an asset account, Prepaid Advertising. Prepare a journal entry that would credit a liability account, Unearned Revenue. No...
Question 3 (50 marks) Barbara Imagine created Imagine That, a proprietorship, in 2016. Imagine That’s unadjusted T-accounts had the following December 31, 2018 balances: Cash Accounts Receivable Supplies Bal. 82,000 Bal. 127,000 Bal. 13,000 Office Furniture Accumulated Amortization, Office Furniture Accounts Payable Bal. 166,000 Bal. 31,000 Bal. 43,000 Bank Loan Unearned Service Revenue Salary Payable Bal. 115,000 Bal. 1,000 Barbara Imagine, Capital Barbara Imagine, Withdrawals Service Revenue Bal. 118,000 Bal. 157,000 Bal. 375,000 Supplies Expense Salary Expense Advertising Expense Bal....
Question 2 (20 marks) Required: Prepare a single journal entry, with explanation, for each of the following transactions to correct the error made: Debited office furniture and credited accounts payable regarding a $ 6,000 purchase of computer equipment on account. Accrued a $ 12,000 bonus by debiting salary expense and crediting accounts payable. Adjusted prepaid advertising by debiting prepaid advertising and crediting advertising expense for $ 3,000. This adjusting journal entry should have debited advertising expense and credited prepaid advertising...
General Journal entry options:
No Journal Entry Required
Accounts Payable
Accounts Receivable
Accumulated Amortization
Accumulated Depreciation
Advertising Expense
Amortization Expense
Bad Debt Expense
Buildings
Cash
Common Stock
Copyrights
Cost of Goods Sold
Deferred Revenue
Delivery Expense
Depreciation Expense
Dividends
Dividends Payable
Donation Revenue
Equipment
Franchise Rights
Goodwill
Income Tax Expense
Income Tax Payable
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Land
Legal Expense
Licensing Rights
Logo and Trademarks
Notes Payable (long-term)
Notes Payable (short-term)
Notes Receivable...
Question 4 (20 marks) John Tell created Tennis Rackets, a proprietorship, in 2015. Tennis Rackets produced a post-closing trial balance on December 31 2018, which included the following: Tennis Rackets Post-Closing Trial Balance December 31, 2018 ACCOUNT DEBIT CREDIT Cash $ 30,000 Accounts Receivable 80,000 Supplies 5,000 Prepaid Insurance 6,000 Office Equipment 130,000 Accumulated Amortization, Office Equipment $ 60,000 Building 300,000 Accumulated Amortization, Building 45,000 Land 400,000 Accounts Payable 49,000 Salary Payable 80,000 Unearned Service Revenue 25,000 Note Payable, Long...
After the success of the company's first two months, Santana Rey continues to operate Business Solutions. The November 30, 2018, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2018) follows. Credit Debit $ 38,564 12,918 2,645 2,100 2,920 8,700 $ 0 20,000 No. Account Title 101 Cash 106 Accounts receivable 126 Computer supplies 128 Prepaid insurance 131 Prepaid rent 163 Office equipment 164 Accumulated depreciation office equipment 167 Computer equipment 168 Accumulated depreciation-Computer equipment...
Question 1 (20 marks) Determine if a debit, credit, or nil entry would be made to the balance sheet: Increase Accounts Receivable Increase Accounts Payable Decrease Mortgage Payable Increase Office Supplies Decrease Owner’s Capital Increase Cash Decrease Office Furniture Increase Owner’s Withdrawals Decrease Unearned Revenue Increase Revenue Determine if the normal balance is a debit or a credit: Service Revenue Unearned Revenue Cash Accounts Receivable Bank Loan Advertising Expense Note Payable Rent Expense Owner’s Capital Undeveloped Land Question 2 (10...
Return to question Exercise 3-18B Record closing entries and prepare a post-closing trial balance (LO3-6, 3-7) A company's fiscal year-end is December 31, Year 1. The following is an adjusted trial balance as of December 31. Credit Debit $ 10,300 30,500 21,500 Accounts Cash Supplies Prepaid Rent Accounts Payable Notes Payable Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Advertising Expense Rent Expense Utilities Expense Totals $ 1,300 13,000 31,500 7,300 2,300 55,700 18,300 11,300 8,300 6,300 $100,800 $...