Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month
Question # 00025343
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Updated on: 09/07/2014 01:11 AM Due on: 09/21/2014
Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31, 2015:
1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,390. No interest expense has yet been recorded.
2. Depreciation of the firm’s office building is based on an estimated life of 30 years. The building was purchased in 2011 for $310,000.
3. Accrued, but unbilled, revenue during December amounts to $70,000.
4. On March 1, the firm paid $1,600 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance.
5. The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $3,600 had actually been earned by the firm.
6. The company’s policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $2,500.
a. Record the necessary adjusting journal entries on December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)
b. By how much did Sweeney & Allen’s net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.) (Round your final answer to the nearest whole dollar.)
Part 2.
Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the following items, provide the journal entry (if one is needed) to record the initial transaction and provide the adjusting entry, if any, required on May 31, assuming the company makes adjusting entries monthly.
a. On May 1, borrowed $290,000 cash from National Bank by issuing a 9 percent note payable due in three months. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. On May 1, paid rent for six months beginning May 1 at $34,000 per month. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
c. On May 2, sold season tickets for a total of $860,000 cash. The season includes 60 racing days: 15 in May, 20 in June, and 25 in July. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
d. On May 4, an agreement was reached with Snack-Bars, Inc., allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,390. No interest expense has yet been recorded.
2. Depreciation of the firm’s office building is based on an estimated life of 30 years. The building was purchased in 2011 for $310,000.
3. Accrued, but unbilled, revenue during December amounts to $70,000.
4. On March 1, the firm paid $1,600 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance.
5. The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $3,600 had actually been earned by the firm.
6. The company’s policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $2,500.
a. Record the necessary adjusting journal entries on December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)
b. By how much did Sweeney & Allen’s net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.) (Round your final answer to the nearest whole dollar.)
Part 2.
Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the following items, provide the journal entry (if one is needed) to record the initial transaction and provide the adjusting entry, if any, required on May 31, assuming the company makes adjusting entries monthly.
a. On May 1, borrowed $290,000 cash from National Bank by issuing a 9 percent note payable due in three months. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. On May 1, paid rent for six months beginning May 1 at $34,000 per month. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
c. On May 2, sold season tickets for a total of $860,000 cash. The season includes 60 racing days: 15 in May, 20 in June, and 25 in July. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
d. On May 4, an agreement was reached with Snack-Bars, Inc., allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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Rating:
/5
Solution: Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month