Problem 4-5 (IAA) On June 15, 2020, Romela Company sold 100 air conditioning units. The sale price for each unit is P45,000. All of sales are subject to terms 2/10, n30. The entity used the gross method of accounting for accounts receivable. Required: 1. Prepare journal entry to record the sale. 2. Prepare journal entry to record receipt of the payment assuming the correct amount was received on June 25, 2020. 3. Prepare the journal entry to record receipt of the payment assuming the correct amount was received on July 10, 2020.
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- Purchases transactions Hoffman Company purchased merchandise on account from a supplier for 65,000, terms 1/10, n/30. Hoffman returned 7,500 of the merchandise and received full credit. A. If Hoffman Company pays the invoice within the discount period, what is the amount of cash required for the payment? B. What account is debited by Hoffman Company to record the rerurn?Reversing Entries Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction. 1. On November 1, it purchased land at a cost of 8,000. It made a 2,000 down payment and signed a note payable agreeing to pay the 6,000 balance in 6 months plus interest at an annual rate of 10%. 2. On December 1, it accepted a 4,200, 3-month, 12% (annual interest rate) note receivable from a customer for the sale of merchandise. On December 31, Thomas made the following related adjustments: Required: 1. Assuming that Thomas uses reversing entries, prepare journal entries to record: a. the January 1, reversing entries b. the March 1, 4,326 collection of the note receivable c. the May 1, 6,300 payment of the note payable 2. Assuming instead that Thomas does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable.Unearned Revenue Jennifers Landscaping Services signed a $400-per-month contract on November 1, 2019, to provide plant watering services for Lola Inc.s office buildings. Jennifers received 4 months' service fees in advance on signing the contract. Required: 1. Prepare Jennifers journal entry to record the cash receipt for the first 4 months. 2. Prepare Jennifers adjusting entry at December 31, 2019. 3. CONCEPTUAL CONNECTION How would the advance payment (account(s) and amounts(s)] be reported in Jennifers December 31, 2019, balance sheet? How would the advance payment [account(s) and amount(s)] be reported in Lolas December 31, 2019, balance sheet?
- Problem 2-62B Comprehensive Problem Mulberry Services sells electronic data processing services to firms too Email to own their own computing equipment. Mulberry had the following amounts and amount balances as of January 1, 2019: During 2019, the following transactions occurred (the events described below are aggregations of many individual events): During 2019, Mulberry sold $690,000 of computing services, all on credit. Mulberry collected $570,000 from the credit sales in Transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year. Mulberry paid the interest payable of $8,000. A Wages of $379,000 were paid in cash. Repairs and maintenance of $9,000 were incurred and paid. The prepaid rent at the beginning of the year was used in 2019. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year-end. Mulberry purchased computer paper for $13,000 cash in late December. None of the paper was used by year-end. Advertising expense of $26,000 was incurred and paid. Income tax of $10,300 was incurred and paid in 2019. Interest of $5,000 was paid on the long-term loan. (Continued) Required: 1. Establish a ledger for the accounts listed above and enter the beginning balances. Use a chart of accounts to order the ledger accounts. 2. Analyze each transaction, Journalize as appropriate. (Note: Ignore the date because these events are aggregations of individual events.) 3. Post your journal entries to T-accounts, Add additional T-accounts when needed. 4. Use the ending balances in the T-accounts to prepare a trial balanceWrite-Off of Uncollectible Accounts King Enterprises had 27 customers utilizing its financial planning services in 2019. Each customer paid King $25,000 for receiving Kings assistance. King estimates that 2% of its $675,000 credit sales in 2019 will be uncollectible. During 2020, King wrote off $2,700 related to services performed in 2019. Required: 1. Prepare the journal entry to record the defaulted balance. 2. Prepare the adjusting entry to record the bad debt expense for 2019.Exercise 3-47 Revenue Adjustments Sentry Transport Inc. of Atlanta provides in-town parcel delivery services in addition to a full range of passenger services. Sentry engaged in the following activities during the current year: Sentry received $5,000 cash in advance from Richs Department Store for an estimated 250 deliveries during December 2019 and January and February of 2020. The entire amount was recorded as unearned revenue when received. During December 2019, 110 deliveries were made for Richs. Sentry operates several small buses that take commuters from suburban communities to the central downtown area of Atlanta. The commuters purchase, in advance, tickets for 50 one-way rides. Each So-ride ticket costs S500. At the time of purchase, Sentry credits the cash received to unearned revenue. At year end, Sentry determines that 10,160 one-way rides have been taken. Sentry operates buses that provide transportation for the clients of a social agency in Atlanta. Sentry bills the agency quarterly at the end of January, April, July, and October for the that quarter. The contract price is S7,500 per quarter. Sentry follows the practice of recognizing revenue from this contract in the in which the service is On December 23, Delta Airlines chartered a bus to transport its marketing group to a meeting at a resort in southern Georgia. The meeting will be held during the last week in January 2020, and Delta agrees to pay for the entire trip on the day the bus departs. At year end, none Of these arrangements have been recorded by Sentry. Required: Prepare adjusting entries at December 31 for these four activities. CONCEPTUAL CONNECTION What would be the effect on revenue if the adjusting entries were not made?
- 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.
- 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.Problem 2-62B Comprehensive Problem Mulberry Services sells electronic data processing services to firms too Email to own their own computing equipment. Mulberry had the following amounts and amount balances as of January 1, 2019: During 2019, the following transactions occurred (the events described below are aggregations of many individual events): During 2019, Mulberry sold $690,000 of computing services, all on credit. Mulberry collected $570,000 from the credit sales in Transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year. Mulberry paid the interest payable of $8,000. A Wages of $379,000 were paid in cash. Repairs and maintenance of $9,000 were incurred and paid. The prepaid rent at the beginning of the year was used in 2019. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year-end. Mulberry purchased computer paper for $13,000 cash in late December. None of the paper was used by year-end. Advertising expense of $26,000 was incurred and paid. Income tax of $10,300 was incurred and paid in 2019. Interest of $5,000 was paid on the long-term loan. (Continued) Required: Establish a T-account for the accounts listed above and enter the beginning balances. Use a chart of accounts to order the T-accounts. Analyze each transaction; Journalize as appropriate. (Note: Ignore the date because these events are aggregations of individual events.) Post your journal entries to the T-accounts. Add additional T-accounts when needed. Use the ending balances in the T-accounts to prepare a trial balance.Transaction Analysis Pollys Cards $ Gifts Shop had the following transactions during the year: Pollys purchased inventory on account from a supplier for $8,000. Assume that Pollys uses a periodic inventory system. On May 1, land was purchased for $44,500. A 20% down payment was made, and an 18-month, 8% note was signed for the remainder. Pollys returned $450 worth of inventory purchased in (a), which was found broken when the inventory was received. Pollys paid the balance due on the purchase of inventory. On June 1, Polly signed a one-year, $15,000 note to First State Bank and received $13,800. Pollys sold 200 gift certificates for $25 each for cash. Sales of gift certificates are recorded as a liability. At year-end, 35% of the gift certificates had been redeemed. Sales for the year were $120,000, of which 90% were for cash. State sales tax of 6% applied to all sales must be remitted to the state by January 31. Required Record all necessary journal entries relating to these transactions. Assume that Pollys accounting year ends on December 31. Prepare any necessary adjusting journal entries. What is the total of the current liabilities at the end of the year?