Assignment after week 6

Course Financial Accounting Principles

Question No. 1

Requirement: Put the effect of following adjustments

Question No. 2 Listed below are nine technical accounting terms.

Unrecorded revenue Adjusting entries Accrued expenses

Book value Matching principle Accumulated depreciation
Unearned revenue Materiality Prepaid expenses
Required:
Each of the following statements may (or may not) describe one of these technical terms. For each
statement, indicate the accounting term described, or answer “None” if the statement does not correctly
describe any of the terms.
a. The net amount at which an asset is carried in the accounting records as distinguished from its market
value.
b. An accounting concept that may justify departure from other accounting principles for purposes of
convenience and economy.
c. The offsetting of revenue with expenses incurred in generating that revenue.
d. Revenue earned during the current accounting period but not yet recorded or billed, which requires an
adjusting entry at the end of the period.
e. Entries made at the end of the period to achieve the goals of accrual accounting by recording revenue
when it is earned and by recording expenses when the related goods and services are used.
f. A type of account credited when customers pay in advance for services to be rendered in the future.
g. A balance sheet category used for reporting advance payments of such items as insurance, rent, and
office supplies.
h. An expense representing the systematic allocation of an asset’s cost over its useful life.

Question No. 2 The Golden Goals, a professional soccer team, prepares financial statements on a
monthly basis.
The soccer season begins in May, but in April the team engaged in the following transactions:
1. Paid $1,200,000 to the municipal stadium as advance rent for use of the facilities for the five-month
period from May 1 through September 30. This payment was initially recorded as
Prepaid Rent.
2. Collected $4,500,000 cash from the sale of season tickets for the team’s home games. The entire
amount was initially recorded as Unearned Ticket Revenue. During the month of May, the Golden Goals
played several home games at which $148,800 of the season tickets sold in April were used by fans.
Required:
Prepare the two adjusting entries required on May 31.

Question No. 3 The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on
a monthly basis. Among the items requiring adjustment on December 31, 2011, are the following:
1. The company has outstanding a $50,000, 9 percent, two-year note payable issued on July 1, 2010.
Payment of the $50,000 note, plus all accrued interest for the two-year loan period, is due in full on June
30, 2012.
2. The firm is providing consulting services to Texas Oil Company at an agreed-upon rate of $1,000 per
day. At December 31, 10 days of unbilled consulting services have been provided.
Required:
a. Prepare the two adjusting entries required on December 31 to record the accrued interest expense and
the accrued consulting revenue earned.
b. Assume that the $50,000 note payable plus all accrued interest are paid in full on June 30, 2012. What
portion of the total interest expense associated with this note will be reported in the firm’s 2012 income
statement?
c. Assume that on January 30, 2012, Gilbert, Marsh, & Kester receive $25,000 from Texas Oil Company
in full payment of the consulting services provided in December and January. What portion of this
amount constitutes revenue earned in January?
Question No. 4
Jan’s Dance Studio, Inc., performs adjusting entries every month, but closes its accounts only at year-end.
The studio’s year-end adjusted trial balance dated December 31, 2019, appears below. (Bear in mind, the
balance shown for Retained Earnings was last updated on December 31, 2018)
DECEMBER 31, 2011
JAN’S DANCE STUDIO. INC.
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2019
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $171,100
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400
Prepaid studio rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Unexpired insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200
Supplies . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 500
Equipment. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 18,000
Accumulated depreciation: equipment . . . . . . . .. . . . . . . . $ 7,200
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200
Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Income taxes payable. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 6,000
Unearned studio revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 100,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Studio revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000
Salary expense. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 85,000
Supply expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Depreciation expense: equipment . . . . . . . . . . . . . . . . . . . 1,800
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000
$344,200 $344,200
REQUIRED:
a. Prepare for the year ended December 31, 2019.
- An Income Statement
- Statement of Retained Earnings
- Balance Sheet
b. Prepare the necessary Closing Entries at December 31, 2019.
c. Prepare an After-Closing Trial Balance dated December 31, 2019.
Question No. 5
Clint Still more operates a private investigating agency called Still more Investigations. Some clients pay
in advance for services; others are billed after services have been performed. Advance payments are
credited to an account entitled Unearned Retainer Fees. Adjusting entries are performed on a monthly
basis. An unadjusted trial balance dated December 31, 2019, follows. (Bear in mind that adjusting entries
have already been made for the first 11 months of 2019, but not for December.)
Other Data
1. Accrued but unrecorded client fees earned at December 31 amount to $1,500.
2. Records show that $2,500 of cash receipts originally recorded as Unearned Retainer Fees had been
earned as of December 31.
3. Office supplies on hand at December 31 amount to $110.
4. The company purchased all of its office equipment when it first began business. At that time, the
equipment’s estimated useful life was six years (or 72 months).
5. On October 1, 2019, the company renewed its rental agreement paying $1,800 cash for six months’
rent in advance.
6. On March 1 of the current year, the company paid $1,080 cash to renew its 12-month insurance
policy.
7. Accrued but unrecorded salaries at December 31 amount to $1,900.
8. On June 1, 2019, the company borrowed money from the bank by signing a $9,000, 8 percent, 12-
month note payable. The entire note, plus 12 months’ accrued interest, is due on May 31, 2020.
9. The company’s CPA estimates that income taxes expense for the entire year is $7,500.

STILLMORE INVESTIGATIONS
UNADJUSTED TRIAL BALANCE
DECEMBER 31, 2019
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,585
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Prepaid rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
Unexpired insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Accumulated depreciation: office equipment . . . . . . . . . . . . . . . . . . . $35,250
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Note payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
 Unearned retainer fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Client fees earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Office supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
Depreciation expense: office equipment. . . . . . . . . . . . . . . . . . . . . . . 8,250
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,775
Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010
Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,100
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,900
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $149,260 $149,260

Required:
a. For each of the above numbered paragraphs, prepare the necessary adjusting entry (including an
explanation).
b. Prepare the company’s adjusted trial balance dated December 31, 2019.
c. Using figures from the adjusted trial balance prepared in b, compute net income for the year ended
December 31, 2019.
’S DANCE STUDIO, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2011