ACC - Pruitt Corp & American Eagle Problems

Problem #2 - Pruitt Corp.

The following data relate to the accounts of Pruitt Corporation. Prepare the necessary adjusting journal entries indicated by each item for the year ended December 31, 2013.

A. A four-year insurance policy was purchased on April 1, 2013. The $96,000 insurance premium was fully paid on that date and a debit to prepaid insurance was recorded.

B. Unpaid salaries at year-end amount to $200,550.

C. Pruitt Corp. rents out some of its office space to Alliance Corp at $2,400 per month. On November 1, 2013, Pruitt Corp. recorded a credit toRent Revenue for receipt of a rent payment of $7,200 from Alliance Corp. to cover rent from November 1, 2013 to January 31, 2014.

D. Pruitt Corporation holds bonds of another corporation. The bonds were purchased by Pruitt on June 30, 2013. Interest in the amount of $1,100 is received each year every June 30^th.

i) Prepare any necessary adjusting entries on December 31, 2013.

ii) Prepare the journal entry to record the receipt of interest on June 30, 2014.

Problem #3 American Eagle

Required: Access the American Eagle 2013 Annual Report/10K (online). Look at the financial statements and Notes to the financial statements closely and attempt to infer what kinds of information they report. Then, answer the following questions based on the Report.

1. On what day of the year does their fiscal year end (their policy in general, not just for one year)?

2. For how many years do they present complete:

a. Balance Sheets

b. Income Statements

c. Cash Flow Statements

3. Are their financial statements audited by independent CPAs? How do you know?

4. Did their total assets increase or decrease over the last year?

5. What was the ending balance of inventories?

6. Write out their basic accounting equation in dollars at year-end.

7. Use the amounts in the financial statements to write out the retained earnings equation for the 2013 fiscal year (include effects of stock awards and treasury reissue).

8. (a) From the Balance Sheet, compute the change in Cash from fiscal year-end 2012 to 2013.

(b) Briefly reconcile the change in Cash reported on the Balance Sheet to the three major categories of the Cash Flow Statement.