Mid Term.docx

Financial Accounting Midterm 1. Determine if the following adjusting entries are ◦ accrued expense (AE) ◦ prepaid expense (PE) ◦ accrued revenue (AR) ◦ unearned revenue (UR) a. _UR____ Atlas Magazine was previously prepaid $400,000 by subscribers and has delivered half of the magazines ordered. b. __UR___ Hornsby Company agreed to provide 1,000 units of its product to Michaels Inc. and has substantially completed the agreement. c. ___AE__ Nancy and Sons owes its employees $30,000 for work done over the past two weeks. d. __AE___ Replay Inc. advertised on TV 44 during the month of April, but has not yet made an entry to record the event. e. __PE___ Centurion Company paid Reliable Insurance Company $54,000 for insurance for twelve months, six of which have passed. f. ___UR__ Reliable Insurance Company received a payment of $54,000 for insurance for twelve months from Centurion Company and six months have passed. 4.) Leon Jackson is esctatic! First National Bank just approved a loan for Leon to start a Web site design and maintenance business called Webworks. He is now ready to purchase his needed equipment, hire his administrative help, and begin designing sites. During June, his first month of business, the following occurred: 2. Determine if the following transactions for Marlin Corporation require an adjustment or not. If an adjusting entry is required, give the correct entry.

a. At the beginning of the month, Marlin agreed to perform services for the next three months for Catsui Corporation for $30,000 per month. Catsui paid Marlin $90,000 in advance. One month has now passed. AT the

b. Marlin pays its employees every two weeks. At the end of the month, Marlin owes its employees $480,000, but will not pay them until the following week.

Financial Accounting Midterm WAGE EXPENSES & ACCRUED WAGES

c. Marlin paid $300,000 for rent at the beginning of the month by debiting prepaid rent and crediting cash. The $300,000 covered six months of occupancy, but only one month has passed. $50,000 SHOULD BE DEBITED FROM d. At the beginning of the month, Marlin agreed to perform services for Ryland Company for $16,000 per month for the next six months. Ryland has not yet paid any cash to Marlin and the work is not substantially complete.

3. Keating Inc. rents its headquarters from Starling Enterprises for $10,000 per month. On September 1, 20XX, Keating pays Starling $60,000 for six months worth of rent. a) Date

Account Title

Sept 1

Prepaid Rent

Cash

Debit

Credit

60000 60000

b)

Date

Account Title

Sept 1

Cash

Debit

Credit

60000

Unearned Rent Revenue

60000

c)

Date

Account Title

Dec 31

Rent Expenses

Prepaid Rent

Debit

Credit

40000 40000

d)

Date

Account Title

Debit

Credit

Financial Accounting Midterm Dec 31

Unearned Rent Revenue

Rent Revenue

40000 40000

4. Leon Jackson is ecstatic! First National Bank just approved a loan for Leon to start a Web site design and maintenance business called Webworks. He is now ready to purchase his needed equipment, hire his administrative help, and begin designing sites. During June, his first month of business, the following occur:

Financial Accounting Midterm

Financial Accounting Midterm

Financial Accounting Midterm 5. Jan Haley owns and operates Haley’s Dry Cleaners. The following occurred during December:

Financial Accounting Midterm

Financial Accounting Midterm

Financial Accounting Midterm

Financial Accounting Midterm 8.The following events occurred during the month of May for McLain Company. a. McLain sells 240 units for $20 each. McLain collects cash for 200 of these units. The units cost McLain $8 each to purchase. b. McLain purchases $1,800 worth of inventory on account. c. McLain collects $500 in cash on its A/R. d. McLain takes out a loan for $400. e. McLain pays out $350 cash in dividends. f. McLain receives a contribution of $600 from its owners. g. McLain purchased a new piece of equipment. The new equipment cost $1,000 and was paid for in cash. h. McLain pays $500 of its accounts payable. i. McLain incurs $500 in salaries expense, but will not pay workers until next month. j. McLain incurs $300 in rent expense and pays it in cash. k. McLain prepays $200 in cash for insurance. l. Taxes, paid in cash, are $110. Required: a. Prepare journal entries for the above transactions. b. Complete the T-accounts below. Numbers already under the accounts represent the prior balance in that account. c. Prepare a trial balance for May.

Financial Accounting Midterm (a) Date

Particulars

Dr

a.

cash a/c Dr

$4,000

Account Receivable a/c Dr

$800

To Sales Revenue a/c

Cr.

$4,800

( being goods sold) b

Inventory / purchase Dr

$1,800

To Account payable

$1,800

(being inventory purchased ) c

cash Dr

$500 $500

To accounts receivable a/c ( being cash collected from AR ) d

cash Dr

$400

To Note Payable / Loan

$400

( Being loan taken) e

Retained earnings Dr

$350

To cash

$350

( being dividend paid) f

cash Dr

$600

To Capital

$600

( Being contribution received from owners) g

Equipment Dr

$1,000

To cash

$1,000

(being new equipment purchased) h

Accounts payable Dr

$500

Financial Accounting Midterm

To cash

$500

(being cash paid to AP) i

salary expense Dr

$500

To Salary payable

$500

( being salary due but not paid) j

Rent expense Dr

$300

To cash

$300

( being rent expense paid) k

prepaid insurance Dr

$200

To cash

$200

( being insurace paid in advance) l

Tax expense Dr To cash ( being tax paid )

$110 $110

Financial Accounting Midterm (b&c)