Concept explainers
Problem 3-6B
Recording prepaid expenses and unearned revenues
P4
Tremor Co. had the following transactions in the last two months of its fiscal year ended May 31. (Entries can draw from the following partial chart of accounts: Cash; Prepaid Insurance; Prepaid Advertising; Prepaid Consulting Fees; Unearned Service Fees; Services Fees Earned ;Insurance Expense; Advertising Expense; Consulting Fees Expense.)
Apr. 1- Paid $2,450 cash to an accounting firm for future consulting services.
1- Paid $3,600 cash for 12 months of insurance through March 31 of the next year.
30- Received $8,500 cash for future services to be provided to a customer.
May 1- Paid $4,450 cash for future newspaper advertising.
23- Received $10,450 cash for future services to be provided to a customer.
31- Of the consulting services paid for on April 1, $2,000 worth has been performed.
31- A portion of the insurance paid for on April 1 has expired. No adjustment was made in April to Prepaid Insurance.
31- Services worth $4,600 are not yet provided to the customer who paid on April
30.
31- Of the advertising paid for on May 1, $2,050 worth is not yet used.
31- The company has performed $5,500 of services that the customer paid for on May
23.
Required
1. Prepare entries for these transactions under the method that initially records prepaid expenses and unearned revenues in
2. Prepare entries for these transactions under the method that initially records prepaid expenses and unearned revenues in income statement accounts. Also prepare adjusting entries at the end of the year.
Analysis Component
3. Explain why the alternative sets of entries in parts 1 and 2 do not result in different financial statement amounts.
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FUND.ACCT.PRIN.(LOOSELEAF)
- Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year: The following transactions relating to payroll, payroll deductions, and payroll taxes Occurred during December: Dec. 2. Issued Check No. 410 for 3,400 to Jay Bank to invest in a retirement savings account for employees. 2. Issued Check No. 411 to Jay Bank for 27,046, in payment of 9,273 of social security tax, 2,318 of Medicare tax, and 15,455 of employees federal income tax due. 13. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: Dec. 13. Issued Check No. 420 in payment of the net amount of the biweekly payroll to fund the payroll bank account. 13. Journalized the entry to record payroll taxes on employees earnings of December13: social security tax, 4,632; Medicare tax, 1,158; state unemployment tax, 350; federal unemployment tax, 125. 16. Issued Check No. 424 to Jay Bank for 27,020, in payment of 9,264 of social security tax, 2,316 of Medicare tax, and 15,440 of employees federal income tax due. 19. Issued Check No. 429 to Sims-Walker Insurance Company for 31,500, in payment of the semiannual premium on the group medical insurance policy. 27. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: 27. Issued Check No. 541 in payment of the net amount of the biweekly payroll to fund the payroll bank account. 27. Journalized the entry to record payroll taxes on employees earnings of December27: social security tax, 4,668; Medicare tax, 1,167; state unemployment tax, 225; federal unemployment tax, 75. 27. Issued Check No. 543 for 20,884 to State Department of Revenue in payment of employees state income tax due on December 31. 31. Issued Check No. 545 to Jay Bank for 3,400 to invest in a retirement savings account for employees. 31. Paid 45,000 to the employee pension plan. The annual pension cost is 60,000. (Record both the payment and unfunded pension liability.) Instructions 1. Journalize the transactions. 2. Journalize the following adjusting entries on December 31: a. Salaries accrued: operations salaries, 8,560; officers salaries, 5,600; office salaries,1,400. The payroll taxes are immaterial and are not accrued. b. Vacation pay, 15,000.arrow_forwardQuestion 2 At the beginning of the year, HR-Plus consulting had a net accounts receivable balance of 1,200,000. This balance includes an Allowance for Doubtful Accounts of $62,500, During the year, the following transactions occurred: Total Sales on account were $15,280,000 • Wrote off $43,000 from the Department of Forestry as uncollectable At year end, the accounts receivable balances were as follows: Age Collection Probability Amount 0-30 days 98% $800,000 31-60 days 90% 400,000 61-90 days 75% 116,000 Over 90 days 50% 16,000 REQUIRED: Show the transactions for items i and ii How much Accounts Receivable was collected during the year Calculate the ending balance of the Allowance for Doubtful Accountsarrow_forwardProblem 6 Tantrum Company provided the following information in relation to accounts receivable at year-end: Days Outstanding % Uncollectible Estimated Amount 1,200,000 0-60 1% 2% 61-120 900,000 Over 120 1,000,000 6% During the current year, the entity wrote off P70,000 in accounts receivable and recovered P20,000 that had been written off in prior years. At the beginning of current year, the allowance for uncollectible accounts was P60,000. Under the aging method, what amount of uncollectible accounts expense should be reported for the current year?arrow_forward
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