On September 1, 2023, Baker Construction, Inc. signed a contract to rent a warehouse. Baker's rent on the warehouse started that same day. On September 1, the landlord did not require Baker to pay the first month's rent. The landlord indicated that she would stop-by on October 5 to collect the $2,000 of rent for the month of September. The following is a partial list of the accounts in Baker's General Ledger. These are the only accounts you need for this problem. ▷ Cash ▷ Rent Payable (liability account) ▷ Rent Expense Use the forms on Tab 7-8 in the Excel workbook Chapter 07 c - Problem 7-1 to 7-8 Forms to complete this problem. Requirement 1 Prepare the General Journal entry Baker should make on September 1, 2023. If no entry is required, put "No Entry Required" on the General Journal form. Requirement 2 Prepare the September 30, 2023 Rent Payable adjusting entry. If no entry is required, put "No Entry Required" on the General Journal form. Requirement 3 Prepare the General Journal entry Baker should make on October 5, 2023 to record the $2,000 payment of September's rent. If no entry is required, put "No Entry Required" on the General Journal form.

On September 1, 2023, Baker Construction, Inc. signed a contract to rent a warehouse. Baker's rent on the warehouse started that same day. On September 1, the landlord did not require Baker to pay the first month's rent. The landlord indicated that she would stop-by on October 5 to collect the $2,000 of rent for the month of September. The following is a partial list of the accounts in Baker's General Ledger. These are the only accounts you need for this problem. ▷ Cash ▷ Rent Payable (liability account) ▷ Rent Expense Use the forms on Tab 7-8 in the Excel workbook Chapter 07 c - Problem 7-1 to 7-8 Forms to complete this problem. Requirement 1 Prepare the General Journal entry Baker should make on September 1, 2023. If no entry is required, put "No Entry Required" on the General Journal form. Requirement 2 Prepare the September 30, 2023 Rent Payable adjusting entry. If no entry is required, put "No Entry Required" on the General Journal form. Requirement 3 Prepare the General Journal entry Baker should make on October 5, 2023 to record the $2,000 payment of September's rent. If no entry is required, put "No Entry Required" on the General Journal form.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 46E: Exercise 3-46 Identification and Analysis of Adjusting Entries Medina Motor Service is preparing...

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Brief Exercise 3-32 Adjusting Entries-Deferrals Tyndal Company had the following items that required adjustment at December 31, 2019. Purchased equipment for $40,000 on January 1, 2019. Tyndal estimates annual depreciation to be $3,100. Paid $2,400 for a 2-year insurance policy on July 1, 2019. The amount was debited to Pre-paid Insurance when paid. Collected $1,200 rent for the period December 1, 2019 to March 30, 2020. The amount was credited to Unearned Service Revenue when received. Required: Prepare the adjusting entries needed at December 31. CONCEPTUAL CONNECTION What is the effect on the financial statements if these adjusting entries were not made?
Exercise 3-40 Revenue and Expense Recognition Electronic Repair Company repaired a high-definition television for Sarah Merrifield in December 2019. Sarah paid $80 at the time of the repair and agreed to pay Electronic Repair $80 each month for 5 months beginning on January 15, 2020. Electronic Repair used $120 of supplies, which were purchased in November 2020, to repair the television. Assume that Electronic Repair uses accrual-basis accounting. Required: In what month or months should revenue from this service be recorded by Electronic Repaid? In what month or months should the expense related to the repair of the television be recorded by Electronic Repair? CONCEPTUAL CONNECTION Describe the accounting principles used to answer the above questions.
Exercise 3-46 Identification and Analysis of Adjusting Entries Medina Motor Service is preparing adjusting entries for the year ended December 31, 2019. The following items describe Medina s continuous transactions during 2019: Medinas salaried employees are paid on the last day of every month. Medinas hourly employees are paid every other Friday for the 2 weeks' work. The next payday falls on January 5, 2020. In November 2019, Medina borrowed $600,000 from Bank One, giving a 9% note payable with interest due in January 2020. The note was properly recorded. Medina rents a portion of its parking lot to the neighboring business under a long-term lease agreement that requires payment of rent 6 months in advance on April 1 and October 1 of each year. The October 1, 2019, payment was made and recorded as prepaid rent. Medinas department recognizes the entire revenue on every auto service job when the job is complete. At December 31, several service jobs are in process. Medina recognizes depreciation on shop equipment annually at the end of each year. Medina purchases all of its office supplies from Office Supplies Inc. All purchases are recorded in the supplies account. Supplies expense is calculated and recorded annually at the end of each year. Required: Indicate whether or not each item requires an adjusting entry at December 31, 2019. If an item requires an adjusting entry, indicate which accounts are increased by the adjustment and which are decreased.
Ledger accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet The unadjusted trial balance of Recessive Interiors at January 31, 2019, the end of the year, follows: The data needed to determine year-end adjustments are as follows: a. Supplies on hand at January 31 are 2,850. b. Insurance premiums expired during the year are 3,150. c. Depreciation of equipment during the year is 5,250. d. Depreciation of trucks during the year is 4,000. e. Wages accrued but not paid at January 31 are 900. Instructions 1. For each account listed in the unadjusted trial balance, enter the balance in the appropriate Balance column of a four-column account and place a check mark () in the Posting Reference column. 2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (3) as needed. 3. Journalize and post the adjusting entries, inserting balances in the accounts affected. a. Record the adjusting entries on Page 26 of the journal. The following additional accounts from Recessive Interiors' chart of accounts should be used: Wages Payable, 22; Depreciation ExpenseEquipment, 54; Supplies Expense, 55; Depreciation ExpenseTrucks, 56; Insurance Expense, 57. 4. Prepare an adjusted trial balance. 5. Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet. 6. Journalize and post the closing entries. Record the closing entries on Page 27 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 7. Prepare a post-closing trial balance.
Problem 3-71B Preparing a Worksheet (Appendix 3A) Flint Inc. operates a cable television System. At December 31, 2019, the following unadjusted account balances were available: The following data are available for adjusting entries: At year end, $1,500 Of office supplies remain unused. Annual depreciation on the building is $20,000. Annual depreciation on the equipment is $150,000 The interest rate on the note is 8%. Four months' interest is unpaid and unrecorded at December 31, 2019. At December 31, 2019, services of $94,000 have performed but are unbilled and unrecorded. Utility bills of $2,800 are unpaid and unrecorded at December 31, 2019. Income taxes of $49,633 were unpaid and unrecorded at year end. Â Required: Prepare a worksheet for Flint. Prepare an income statement, a retained earnings statement, and a classified balance sheet for Flint. Prepare the closing entries.
Expense Adjustments Faraday Electronic Service repairs stereos and DVD players. During 2019, Faraday engaged in the following activities: On September 1, Faraday paid Wausau Insurance $4,860 for its liability insurance for the next 12 months. The full amount of the prepayment was debited to prepaid insurance. At December 31, Faraday estimates that $1,520 of utility costs are unrecorded and unpaid. Faraday rents its testing equipment from JVC. Equipment rent in the amount of $1,440 is unpaid and unrecorded at December 31. In late October, Faraday agreed to become the sponsor for the sports segment of the evening news program on a local television station. The station billed Faraday $4,350 for 3 months' sponsorship-November 2019, December 2019, and January 2020-in advance. When these payments were made, Faraday debited prepaid advertising. At December 31, 2 months' advertising has been and I month remains unused. Required: Prepare adjusting entries at December 31 for these four activities. CONCEPTUAL CONNECTION What would be the effect on expenses if the adjusting entries were not made?
Case 2-68 Accounting for Partially Completed Events: 3 Prelude to Chapter 3 Ehrlich Smith. the owner of The Shoe Bone has asked you to help him understand the proper way to account for certain accounting items as he prepares his 2019 financial statements. Smith has provided the following information and observations: (Continued) a. A 3-year fire insurance policy was purchased on 2019, for $2,400. Smith believes that a part of the cost of the insurance policy should be allocated to each period that benefits from its coverage. b. The store building was purchased for 580,000 in January 2011. Smith expected then (as he does now) that the building will be serviceable as a shoe store for 20 years from the date of purchase. In 2011, Smith estimated that he could sell the property for $6,000 at the end of its serviceable life. He feels that each period should bear some portion of the cost of this long-lived asset that is slowly being consumed. c. The Shoe Box borrowed 520300 on a 1-year, 8% note that is due on September 1 next year) Smith notes that $21,600 cash will be required to repay the note at maturity. The $1,600 difference is, he feels, a cost of using the loaned funds and should be spread over the periods that benefit from the use of' the loan funds; Required: Explain what Smith is trying to accomplish with the three items. Are his objectives supported by the concepts that underlie accounting?
Case 3-73 Recognition of Service Contract Revenue Zac Murphy is president of Blooming Colors Inc. which provides landscaping services in Tallahassee, Florida. On November 20, 2019, Mr. Murphy signed a service contract with Eastern State University. Under the contract, Blooming Colors will provide landscaping services for all Of Easterns buildings for a period of 2 years beginning on January l, 2020, and Eastern will pay Blooming Colors on a monthly basis beginning on January 31, 2020. Although the same amount of landscaping services will be rendered in every month, the contract provides for higher monthly payments in the first year. Initially, Mr. Murphy proposed that the revenue from the contract should be recognized when the contract is signed in 2019; however, his accountant, Sue Storm, convinced him that this would be inappropriate. Then Mr. Murphy proposed that the revenue should be recognized in an amount equal to the cash collected under the contract. Again, Ms. Storm argued against his proposal, indicating that generally accepted accounting principles (GAAP) required recognition of an equal amount of contract revenue each month. Required: Put yourself in the position of Sue Storm. How would you convince Mr. Murphy that his two proposals are unacceptable and that an equal amount of revenue should be recognized every month?
Case 3-73 Recognition of Service Contract Revenue Zac Murphy is president of Blooming Colors Inc. which provides landscaping services in Tallahassee, Florida. On November 20, 2019, Mr. Murphy signed a service contract with Eastern State University. Under the contract, Blooming Colors will provide landscaping services for all Of Easterns buildings for a period of 2 years beginning on January l, 2020, and Eastern will pay Blooming Colors on a monthly basis beginning on January 31, 2020. Although the same amount of landscaping services will be rendered in every month, the contract provides for higher monthly payments in the first year. Initially, Mr. Murphy proposed that the revenue from the contract should be recognized when the contract is signed in 2019; however, his accountant, Sue Storm, convinced him that this would be inappropriate. Then Mr. Murphy proposed that the revenue should be recognized in an amount equal to the cash collected under the contract. Again, Ms. Storm argued against his proposal, indicating that generally accepted accounting principles (GAAP) required recognition of an equal amount of contract revenue each month. Required: 3. If Ms. Storms proposal is adopted. how would the contract be reflected in the balancesheets at the end of 2019 and at the end of 2020?
Case 3-73 Recognition of Service Contract Revenue Zac Murphy is president of Blooming Colors Inc. which provides landscaping services in Tallahassee, Florida. On November 20, 2019, Mr. Murphy signed a service contract with Eastern State University. Under the contract, Blooming Colors will provide landscaping services for all Of Easterns buildings for a period of 2 years beginning on January l, 2020, and Eastern will pay Blooming Colors on a monthly basis beginning on January 31, 2020. Although the same amount of landscaping services will be rendered in every month, the contract provides for higher monthly payments in the first year. Initially, Mr. Murphy proposed that the revenue from the contract should be recognized when the contract is signed in 2019; however, his accountant, Sue Storm, convinced him that this would be inappropriate. Then Mr. Murphy proposed that the revenue should be recognized in an amount equal to the cash collected under the contract. Again, Ms. Storm argued against his proposal, indicating that generally accepted accounting principles (GAAP) required recognition of an equal amount of contract revenue each month. Required: 1. Give a reason that might explain Mr. Murphys desire to recognize contract revenue earlier rather than later.
Problem 3-62A Cash-Basis and Accrual-Basis Income George Hathaway, an electrician, entered into an agreement with a real estate management company to perform all maintenance of basic electrical systems and air-conditioning equipment in the apartment buildings under the companys management. The agreement, which is subject to annual renewal, provides for the payment of a fixed fee of S6,600 on January 1 of each year plus amounts for parts and materials billed separately at the end of each month. Amounts billed at the end of I month are collected in the next month. During the first 3 months of 2019, George makes the following additional billings and cash collections: Required: 1. Calculate the amount of cash-basis income reported for each of the first 3 months. 2. Calculate the amount of accrual-basis income reported for each of the first 3 months. 3. CONCEPTUAL CONNECTION Why do decision-makers prefer accrual-basis accounting?