Case 2-1Maynard Company (A)*Diane Maynard made the following request of afriend:owned all the stock of Maynard Company. At the endof June, Diane Maynard paid herself an $11,700 divi-dend and used the money to repay her loan from theMy bookkeeper has quit, and I need to see the balancesheets of my company. He has left behind a book withthe numbers already entered in it. Would you be will-ing to prepare balance sheets for me? Also, any com-ments you care to make about the numbers would beapprecinted. The Cash account is healthy, which is agood sign, and he has told me that the net inconse inJune was S19,635.company.QuestionsI. Prepare balancp:sheets as of June I and as of June30, in proper format.The book contained a detailed record of transac-tions, and from it the friend was able to copy off thebalanoes at the beginning of the month and at the endof the month as shown in Exhibit 1. Diane MaynardProfessor Robert N. Anthony.EXHIBIT 1 Account BalancesJune 1$ 8,51721,7981,974156,0005,3048,385585,000390,00034,98313,26089,70029,83511,7004,8572,4513,150221,5115,5595,700June 30$ 21,31526,5052,202157,9505,92829,250585,000390,00066,66036,66089,70026,520Accounts payableAccounts receivableAccrued wages payableAccumulated depreciation on buildingAccumulated depreciation on equipmentBank notes payableBuildingCapital stockCashEquipment (at cost)LandMerchandise inventoryNote receivable, Diane Maynard5,2652,4512,826229,4466,6307,224Other noncurrent assetsOther noncurrent liabilitiesPrepaid insuranceRetained earningsSupplies on handTaxes payable

Balance Sheet June 01, XXX ASSETS Current Assets Accounts Receivable $…

EXHIBIT Account Balances June 1 June 30 $ 8,517 21,798 Accounts payable Accounts receivable Accrued wages payable Accumulated depreciation on building Accumulated depreciation on equipment Bank notes payable Building Capital stock Cash $ 21,315 26,505 2,202 157,950 5,928 29,250 585,000 390,000 66,660 36,660 89,700 26,520 1,974 156,000 5,304 8,385 585,000 390,000 34,983 13,260 89,700 29,835 11,700 4,857 2,451 3,150 221,511 5,559 5,700 Equipment (at cost) Land Merchandise inventory Note receivable, Diane Maynard Other noncurrent assets Other noncurrent liabilities Prepaid insurance Retained earnings Supplies on hand Taxes payable 5,265 2,451 2,826 229,446 6,630 7,224

EXHIBIT Account Balances June 1 June 30 $ 8,517 21,798 Accounts payable Accounts receivable Accrued wages payable Accumulated depreciation on building Accumulated depreciation on equipment Bank notes payable Building Capital stock Cash $ 21,315 26,505 2,202 157,950 5,928 29,250 585,000 390,000 66,660 36,660 89,700 26,520 1,974 156,000 5,304 8,385 585,000 390,000 34,983 13,260 89,700 29,835 11,700 4,857 2,451 3,150 221,511 5,559 5,700 Equipment (at cost) Land Merchandise inventory Note receivable, Diane Maynard Other noncurrent assets Other noncurrent liabilities Prepaid insurance Retained earnings Supplies on hand Taxes payable 5,265 2,451 2,826 229,446 6,630 7,224

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter1: Accounting And The Financial Statements

Section: Chapter Questions

Problem 69.2C

See similar textbooks

Similar questions

Case 2-69 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After much consideration, Cam and Anna decide to organize their company as a corporation. On January 11 2019, Front Row Entertainment Inc begins operations. Due to Cams family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile. Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January: Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock. 1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9% each January I, starting in 202.0. It will repeat the amount borrowed in 5 years. 1 The company paid $1,200 in legal fees associated with incorporation. 1 Office equipment was purchased with $1000 in cash. 1 The company pays $800 to rent office space for January. 3 A 1-year insurance policy was purchased for $3,600. 3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply Services agreed to accept $1,000 in 15 days with the remainder due in 30 days. 5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15. 8 Venues for all four Charm City concerts were reserved by paying $10,000 cash. 12 Advertising costs of $4,500 were paid to promote the concert tour. 18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3. 25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for Charm Citys appearance. Of this total amount. $400 was received immediate with the remainder due in 15 days. The festive] took place on January 23. 25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records the fees paid to the artist in an operating expense account called Artist Fee Expense. 23 Due to the success of the marketing efforts, Front Row Entertainment received $3300 in advance ticket sales for the upcoming tour. 30 The company collected $200 of the amount due from the January 25 festival. 30 Paid salaries of S1,200 each to Cam and Anna for the month of January. Required: 2. Post the transactions to the general ledger.
Case 2-69 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After much consideration, Cam and Anna decide to organize their company as a corporation. On January 11 2019, Front Row Entertainment Inc begins operations. Due to Cams family connections in the entertainment industry, Cam assumes the major responsibility for signing artists to a promotion contract. Meanwhile. Anna assumes the financial accounting and reporting responsibilities. The following business activities occurred during January: Jan. 1 Cam and Anna invest $8,000 each in the company in exchange for common stock. 1 The company obtains a $25,000 loan from a local bank. Front Row Entertainment agreed to pay annual interest of 9% each January I, starting in 202.0. It will repeat the amount borrowed in 5 years. 1 The company paid $1,200 in legal fees associated with incorporation. 1 Office equipment was purchased with $1000 in cash. 1 The company pays $800 to rent office space for January. 3 A 1-year insurance policy was purchased for $3,600. 3 Office supplies of $2,500 were purchased from Equipment Supply Services. Equipment Supply Services agreed to accept $1,000 in 15 days with the remainder due in 30 days. 5 The company signs Charm City, a local band with a growing cult following, to a four-city tour that starts on February 15. 8 Venues for all four Charm City concerts were reserved by paying $10,000 cash. 12 Advertising costs of $4,500 were paid to promote the concert tour. 18 Paid $1,000 to Equipment Supply Services for office supplies purchased on January 3. 25 To aid in the promotion of the upcoming tour, Front Row Entertainment arranged for Charm City to perform a 20-minute set at a local festival. Front Row Entertainment received $1,000 for Charm Citys appearance. Of this total amount. $400 was received immediate with the remainder due in 15 days. The festive] took place on January 23. 25 Paid Charm City $800 for performing at the festival. Note: Front Row Entertainment records the fees paid to the artist in an operating expense account called Artist Fee Expense. 23 Due to the success of the marketing efforts, Front Row Entertainment received $3300 in advance ticket sales for the upcoming tour. 30 The company collected $200 of the amount due from the January 25 festival. 30 Paid salaries of S1,200 each to Cam and Anna for the month of January. Required: Prepare a trial balance at January 31, 2019.
Problem 2-56A Analyzing Transactions Luis Madero, after working for several years with a large public accounting firm decided to open his own accounting service. The business is operated as a corporation under the name Madero Accounting Services. The following captions and amounts summarize Maderos balance sheet at July 31, 2019. The following events occurred during August 2019. Issued common stock to Ms. Garriz in exchange for $15,000 cash. Paid $850 for first months rent on office space. Purchased supplies of $2,250 on credit. Borrowed $8,000 from the bank. Paid $1,080 on account for supplies purchased earlier on credit. Paid secretarys salary for August of $2,150. Performed amounting services for clients who paid cash upon completion of the service in the total amount of $4,700. Used $3,180 of the supplies on hand. Perfumed accounting services for clients on credit in the total amount of $1,920. Purchased $500 in supplies for cash. Collected $1,290 cash from clients for whom services were performed on credit. Paid $1,000 dividend to stockholders. Required: Record the effects of the transactions listed above on the accounting equation. Use the format given in the problem, starting with the totals at July 31, 20l9. Prepare the trial balance at August 31, 2019.
Problem 2-6B The Accounting Cycle Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year. Sweetwater engaged in the activities described below. So that a realistic trial balance can be prepared, the events described below are aggregations of many individual events. Sold 10,000 shares of common stock for $4.50 per share. Purchased office equipment from Furniture Max Inc. for $18,110 cash. Received $112,880 from clients for services provided. Paid wages $87,300. Borrowed $20,000 from the Bank of America on a 3-year note payable. Paid office rent of $10,200 Purchased office supplies on credit for $2,120 from Office Supply Inc. Paid $1,200 toward the payable established in Transaction g. Paid utility charges incurred during the year of $3,250. Required: 1. Analyze the events for their effect on the accounting equation. 2. Prepare journal entries. (Note: Ignore the date because these events are aggregations of individual events) 3. Post the journal entries to T-accounts. 4. Prepare a trial balance at December 31, 2019.
Case 3-72 Cash- or Accrual-Basis Accounting Karen Ragsdale owns a business that rents parking spots to students at the local university. Karens typical rental contract requires the student to pay the years rent of $450 ($50 per month) on September 1. When Karen prepares financial statements at the end of December, her accountant requires that Karen spread the $450 over the 9 months that each parking Spot is rented. Therefore, Karen can recognize only $200 of revenue (4 months) from each parking spot rental contract in the year the cash is collected and must defer (delay) recognition of the remaining $250 (5 months) to the next year. Karen argues that getting students to agree to rent the parking Spot is the most difficult part of the activity so she Ought to be able to recognize all $450 as revenue when the cash is received from a student. Required: Why do generally accepted accounting principles require the use of accrual accounting rather than cash-basis accounting for transactions like the one described here?
Financial statements We-Sell Realty, organized as a corporation on August 1, 2018, is owned and operated by Omar Farah, the sole stockholder. How many errors can you find in the following statements for We-Sell Realty, prepared after its first month of operations? We-Sell Realty Income Statement August 31, 2018 Sales commissions 140,000 Expenses: Office salaries expense 87,000 Rent expense 18,000 Automobile expense 7,500 Miscellaneous expense 2,200 Supplies expense 1,150 Total expenses 115,850 Net income 25,000 Omar Farah Retained Earnings Statement August 31, 2017 Retained earnings, August 1,2018 0 Dividends (10,000) (10,000) Issued additional common stock August 1,2018 15,000 5,000 Net income 25,000 Retained earnings, August 31, 2018 30,000 Balance Sheet For the Month Ended August 31, 2018 Cash Assets 8,900 Accounts payable 22,350 Total assets 31,250 Liabilities Accounts receivable 38,600 Supplies 4,000 Stockholders Equity Retained earnings 30,000 Total liabilities and stockholders equity 72,600
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2019. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement, 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Provided services on account for the period May 115, 9,180. 16. Paid part-time receptionist for two weeks' salary including the amount owed on April 30, 750. 17. Received cash from cash clients for fees earned during the period May 116, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Provided services on account for the period May 1620, 4,820. 25. Received cash from cash clients for fees earned for the period May 1723, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks' salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Received cash from cash clients for fees earned for the period May 2631, 3,300. 31. Provided services on account for the remainder of May, 2,650. 31. Kelly withdrew 10,500 for personal use. Instructions 1.The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2019, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2019, and place a check mark () in the Posting Reference column Journalize each of the May transactions in a two column Journal starting on Page 5 of the journal and using Kelly Consulting's chart of accounts. (Do not insert the account numbers in the journal at this time.) 2.Post the journal to a ledger of four-column accounts. 3Prepare an unadjusted trial balance. 4.At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a.Insurance expired during May is 275. b.Supplies on hand on May 3 1 are 715. c.Depreciation of office equipment for May is 330. d.Accrued receptionist salary on May 31 is 325. e.Rent expired during May is 1,600. f.Unearned fees on May 31 are 3,210. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owner's equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.
Brief Exercise 2-28 Assumptions and Principles Five common accounting practices are listed below: A customer pays $20 to mail a package on December 30. The delivery company recognizes revenue when the package is delivered in January. Jim Trotter owns C**S Heating Company. In preparing the financial statements, Trotter makes sure that the purchase of a new truck for personal use is not included in C&S’s financial statements. Moseley Inc. recorded land at its purchase price of $50,000. In future periods, the land is reflected in the financial statements at $50,000. Mack Company purchases inventory in March. However, it does not expense that inventory until it is sold in April. Mueller Inc. prepares quarterly and annual financial statements. Required: Identify the amounting principle or assumption that best describes each practice
Exercise 2-41 Transaction Analysis and Business Activities The accountant for Compton Inc. has collected the following information: Compton purchased a tract of land from Jacobsen Real Estate for $875,000 cash. Compton issued 2,000 shares of its common stock to George Micros in exchange for $125,000 cash. Compton purchased a John Deere tractor for $86,000 on credit. Michael Romano paid Compton $10,400 cash for services performed. The services had been performed by Compton several month ago for a [ma] price of $12,000 of which Rotunno had previously paid $1,600. Compton paid its monthly payroll by issuing checks totaling $36,250. Compton declared and paid its annual dividend of $5,000 cash Required: 1. Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below. 2. Indicate whether the transaction is a financing, investing, or operating activity.
The transactions completed by PS Music during June 20Y5 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Music in exchange for common stock by depositing 5,000 in PS Musics checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 20Y5. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 20Y5. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows: Instructions 1. Enter the July 1, 20Y5, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 20Y5.
The transactions completed by PS Music during June 2018 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Musk in exchange for common stock by depositing 5,000 in PS Music s checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on lage 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2018. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2018. 31. Received 3,000 for serving as a disc jockey for a party. July 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 2018 (all normal balances), are as follows: 11 Cash 3,920 41 Fees Earned 6,200 12 Accounts Receivable 1,000 50 Wages Expense 400 14 Supplies 170 51 Office Rent Expense 800 15 Prepaid Insurance 52 Equipment Rent Expense 675 17 Office Equipment 53 Utilities Expense 300 21 Accounts Payable 250 54 Music Expense 1,590 23 Unearned Revenue 55 Advertising Expense 500 31 Common Stock 4,000 56 Supplies Expense 180 33 Dividends 500 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 2018, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. {Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2018.
Case 3-78 Interpreting Closing Entries Barnes Building Systems made the following closing entries at the end of a recent year: a. Income Summary ............................. 129,750 Retained Earnings ........................ 129,750 b. Retained Earnings ........................... 25,000 Dividends ..................................... 25.000 c. Sales Revenue .................................. 495,300 Income Summary ......................... 495,300 d. Income Summary ............................. 104,100 Interest Expense ........................... 104,100 Required: If the sales revenue identified in Entry c was Barness only revenue, what was the total amount of Barness expenses?