Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 2, Problem 2.7BE
• LO2–5
Prepare the necessary adjusting entries at its year-end of December 31, 2018, for the Jamesway Corporation for each of the following situations. No adjusting entries were recorded during the year.
1. On December 20, 2018, Jamesway received a $4,000 payment from a customer for services to be rendered early in 2019. Service revenue was credited.
2. On December 1, 2018, the company paid a local radio station $2,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited.
3. Employee salaries for the month of December totaling $16,000 will be paid on January 7, 2019.
4. On August 31, 2018, Jamesway borrowed $60,000 from a local bank. A note was signed with principal and 8% interest to be paid on August 31, 2019.
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Serial Problem Business Solutions LO P1, A1
Selected ledger account balances for Business Solutions follow.
For Three MonthsEnded December 31, 2019
For Three MonthsEnded March 31, 2020
Office equipment
$
8,100
$
8,100
Accumulated depreciation—Office equipment
405
810
Computer equipment
20,000
20,000
Accumulated depreciation—Computer equipment
1,250
2,500
Total revenue
31,334
44,900
Total assets
83,360
121,668
Required:1. Assume that Business Solutions does not acquire additional office equipment or computer equipment in 2020. Compute amounts for the year ended December 31, 2020, for Depreciation expense—Office equipment and for Depreciation expense—Computer equipment (assume use of the straight-line method).2. Given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment as of December 31, 2020?3. Compute the three-month total asset turnover for Business…
Q.1.3 During the previous financial year, a competitor began litigation against Isomin Ltd regarding a dispute over a design. On 10 April 2021, a judge decided that Isomin Ltd should pay the competitor R45 000 without leave to appeal. Isomin Ltd had treated this matter as a contingent liability in the 31 March 2020 financials.
For each of the events described above, discuss whether an adjusting or non‐adjusting event occurred. In order to get the mark allocated you will need to justify why you believe the event is either an adjusting or non‐adjusting event.Where the events are adjusting, describe the adjustment that must be made as well as the amount and where the events are non‐adjusting, discuss whether any disclosure needs to be made in the notes to the financial statements. Justify your answers.
Chapter 2 Solutions
Intermediate Accounting
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