acct220 week 2 homework latest 2015

Week 2

Berry Corporation prepared the following preliminary trial balance. The trial balance and other information was evaluated by Delton Wiser, CPA. Delton has returned a list of proposed adjustments that are necessary to facilitate preparation of correct financial statements for the year ending December 31, 20X3.

BERRY CORPORATION

Trial Balance

December 31, 20X3

Debits Credits

Cash $30,540 $-

Accounts receivable 45,000 -

Supplies 7,000 -

Equipment 2,44,500 -

Accumulated depreciation - 46,500

Accounts payable - 12,700

Unearned revenue - 31,250

Notes payable - 80,000

Capital stock - 1,00,000

Retained earnings, Jan. 1 - 63,200

Dividends 12,000 -

Revenues - 2,89,800

Wages expense 2,14,600 -

Utilities expense 8,700 -

Selling expense 41,610 -

Depreciation expense 12,000 -

Interest expense 7,500 -

$6,23,450 $6,23,450

Delton discovered that 40% of the unearned revenue appearing in the trial balance had actually been earned as of the end of the year.

A physical count of supplies on hand revealed a year-end balance of only $3,000.

Unpaid and unrecorded invoices for utilities for December amounted to $1,500.

The last payday was December 26. Employees are owed an additional $3,900 that has not been recorded.

Additional depreciation of $3,100 needs to be recorded.

(a) Prepare journal entries relating to the adjustments.

(b) Prepare an adjusted trial balance (you might utilize a partial worksheet for this task, as shown in the downloadable form).

(c) Prepare an income statement and statement of retained earnings for 20X3, and a classified balance sheet as of the end of the year.

(d) Berry's bookkeeper argued with Delton that there was no need to record the adjustments since they have no "net" effect on income. Evaluate whether this observation is true of false, and comment on the appropriateness of this logic.

Examine the following trial balances, before and after adjustment:

CHESTERFIELD CORPORATION

Trial Balance and Adjusted Trial Balance

December 31, 20X9

Trial Balance Adjusted Trial Balance

Debits Credits Debits Credits

Cash $1,66,890 $- $1,66,890 $-

Accounts receivable 87,654 - 1,07,654 -

Supplies 8,992 - 4,500 -

Prepaid rent 6,000 2,000 -

Equipment 1,45,700 - 1,45,700 -

Accumulated depreciation - 37,660 - 44,660

Accounts payable - 13,590 - 13,590

Wages payable - - - 4,500

Interest payable - 1,500

Unearned revenue - 18,000 - 12,000

Notes payable - 50,000 - 50,000

Capital stock - 2,25,000 - 2,25,000

Retained earnings, Jan. 1 - 89,119 - 89,119

Dividends 40,000 - 40,000 -

Revenues - 3,34,490 - 3,60,490

Wages expense 2,76,123 - 2,80,623 -

Rent expense 33,000 - 37,000 -

Depreciation expense - - 7,000 -

Supplies expense - - 4,492 -

Interest expense 3,500 - 5,000 -

$7,67,859 $7,67,859 $8,00,859 $8,00,859

(a) Determine and record the apparent adjusting entries in journal entry format.

(b) Prepare an income statement for the year ending December 31, 20X9.

(c) Prepare a statement of retained earnings for the year ending December 31, 20X9.

(d) Prepare a classified balance sheet as of December 31, 20X9.

Examine each of the following fact scenarios, then prepare initial and end-of-year adjusting entries (when needed) assuming (a) use of a "balance sheet" approach versus (b) use of an "income statement" approach. You may assume a calendar year end for each scenario. Use T-accounts to show how the same financial statement results occur under either approach. The preprinted worksheet includes an illustrative solution for the first scenario.

Scenario 1 A $1,500, one-year insurance policy was purchased on June 1, 20X1.

Scenario 2 $20,000 of unearned revenue was collected on August 1, 20X1. 40% of this amount was earned by the end of the year.

Scenario 3 On December 1, 20X1, $3,000 was prepaid for space in a trade-show booth. The trade show is in February of 20X2.

Scenario 4 A $1,000 customer deposit for future services was received on April 1, 20X1. On June 20, 20X1, the customer canceled the agreement and received a full refund.

Plicta Motors is an automobile service center offering a full range of repair services for high performance cars. The following information is pertinent to adjusting entries that are needed for Plicta, as of March 31, 20X5. Plicta has a fiscal year ending on March 31, and only records adjusting entries at year end.

Plicta has a large investment in repair equipment, and maintains detailed asset records. These records show that depreciation for fiscal "X5" is $123,400.

As of March 31, 20X5, accrued interest on loans owed by Plicta is $21,678.

Auto dealerships outsource work to Plicta. This work is done on account, and billed monthly. As of March 31, 20X5, $54,800 of unbilled services have been provided.

Plicta maintains a general business liability insurance policy. The prepaid annual premium is $6,000. The policy was purchased on October 1, 20X4. Another policy is a 6-month property and casualty policy, and it was obtained on December 1, 20X4, at a cost of $3,000. Both policies were initially recorded as prepaid insurance.

The company prepared a detailed count of shop supplies at March 31, 20X4. $37,904 was on hand at that date. Management believed this level was greater than necessary and undertook a strategy to reduce these levels over the next year. During the fiscal year 20X5, Plicta purchased an additional $125,000 of supplies, and debited the Supplies account. By March 31, 20X5, the effort to reduce inventory was successful, as the count revealed an ending balance of only $13,600.

During the fiscal year, Plicta began offering a service contract to retail customers entitling them regular tire rotations, car washing, and other routine maintenance items. Customers prepay for this service agreement, and Plicta records the proceeds in the Unearned Revenue account. The service plan is a flat fee of $219, and Plicta sold the plan to 456 customers. At March 31, 20X5, it is estimated that 25% of the necessary work has been provided under these agreements.

Plicta's primary advertising is on billboards. Lamzar Outdoor Advertising sold Plicta a plan for multiple sign locations around the city. Because Plicta agreed to prepay the full price of $26,000, Lamzar agreed to leave the signs up for 13 months. Plicta paid on June 1, 20X4, and recorded the full amount as a prepaid. However, the advertising campaign was not begun until July 1, 20X4. It will conclude on July 31, 20X5.

Plicta leases shop space. Monthly rent is due and payable on the first day of each month. Plicta paid March's rent on March 1, and expects to pay April's rent on April 1.

Prepare adjusting entries (hint: when necessary) for Plicta, as of March 31, 20X5.