Title:

Accounting Problems

Question Detail:

The Marchetti soup Company entered into the following transactions during the month of june: (1) purchased inventory on account for $171,000 (assume Marchetti uses a perpetual inventory system); (2) paid $48,000 in salaries to employees for work performed during the month; (3) sold merchandise that cost $120,000 to credit customers for $208,000; (4) collected $167,000 in cash from credit customers; and (5) paid suppliers of inventory $140,000.

Required:

Analyze each transaction and show the effect of each on the accounting equation for a corporation. (Select “None” if the category is not affected.)

Brief Exercise 2-4 Journal entries [LO2]

A company has a fiscal year-end of December 31: (1) on October 1, $14,400 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer $12,000; principal and interest at 9% are due in one year; and (3) equipment costing $63,000 was purchased at the beginning of the year for cash.

Required:

Prepare journal entries for each of the above transactions. (Omit the “$” sign in your response.)

Brief Exercise 2-5 Journal entries [LO4, 5]

A company has a fiscal year-end of December 31: (1) on October 1, $14,400 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer $12,000; principal and interest at 8% are due in one year; and (3) equipment costing $52,000 was purchased at the beginning of the year for cash. Depreciation on the equipment is $10,400 per year.

Required:

Prepare the necessary adjusting entries at December 31 for each of the above items. (Omit the “$” sign in your response.)

Brief Exercise 2-11 Closing entries [LO7]

The year-end adjusted trial balance of the Timmons Tool and Die Corporation included the following account balances: retained earnings, $226,000; sales revenue, $855,000; cost of goods sold, $565,000; salaries expense, $178,000; rent expense, $37,000; and interest expense, $16,000.

Required:

Prepare the necessary closing entries. (Omit the “$” sign in your response.)

Exercise 2-5 The accounting processing cycle [LO2, 3, 4, 5, 6, 7]

Listed below are several terms and phrases associated with the accounting processing cycle. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

List A

List B

k

Source documents

e

Transaction analysis

a

Journal

j

Posting

f

Unadjusted trial balance

b

Adjusting entries

h

Adjusted trial balance

c

Financial statements

d

Closing entries

g

Post-closing trial balance

i

Worksheet

Exercise 2-6 Debits and credits [LO1]

Indicate whether a debit will increase (I) or decrease (D) each of the following accounts listed in items 1 through 16:

Increase (I) or Decrease (D)

Account

Inventory

Depreciation expense

Accounts payable

Prepaid rent

Sales revenue

Common stock

Wages payable

Cost of goods sold

Utility expense

Equipment

Accounts receivable

Allowance for uncollectible accounts

Bad debt expense

Interest expense

Interest revenue

Gain on sale of equipment

Exercise 2-14 Cash versus accrual accounting; adjusting entries [LO4, 5, 8]

The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2011, trial balances contained the following account information:

Nov. 30

Dec. 31

Supplies

1,100

2,200

Prepaid insurance

5,700

4,275

Wages payable

14,500

21,750

Unearned rent revenue

1,500

750

The following information also is known:

The December income statement reported $1,467 in supplies expense.

No insurance payments were made in December.

$14,500 was paid to employees during December for wages.

On November 1, 2011, a tenant paid Righter $2,250 in advance rent for the period November through January. Unearned rent revenue was credited.

Requirement 1:

What was the cost of supplies purchased during December? (Omit the “$” sign in your response.)

Requirement 2:

What was the adjusting entry recorded at the end of December for prepaid insurance? (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

Requirement 3:

What was the adjusting entry recorded at the end of December for accrued wages? (Omit the “$” sign in your response.)

Requirement 4:

What was the amount of rent revenue earned in December? What adjusting entry was recorded at the end of December for unearned rent? (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

Exercise 2-15 External transactions and adjusting entries [LO2, 4, 5]

The following transactions occurred during 2011 for the Beehive Honey Corporation:

Feb. 1

Borrowed $16,000 from a bank and signed a note. Principal and interest at 9.5% will be paid on January 31, 2012.

Apr. 1

Paid $3,100 to an insurance company for a two-year fire insurance policy.

July 17

Purchased supplies costing $2,200 on account. The company records supplies purchased in an asset account. At the December 31, 2011, year-end, supplies costing $982 remained on hand.

Nov. 1

A customer borrowed $5,200 and signed a note requiring the customer to pay principal and 6% interest on April 30, 2012.

Requirement 1:

Record each transaction in general journal form. (Omit the “$” sign in your response.)

Requirement 2:

Prepare any necessary adjusting entries at the December 31, 2011, year-end. No adjusting entries were made during the year for any item.(Round your answers to the nearest whole number. Enter adjusting entries in the same order as above. Omit the “$” sign in your response.)

Problem 2-3 Adjusting entries [LO 4, 5]

Pastina Company manufactures and sells various types of pasta to grocery chains as private label brands. The company’s fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2011, appears below.

Account Title

Debits

Credits

Cash

30,000

Accounts receivable

40,000

Allowance for uncollectible accounts

3,000

Supplies

1,500

Inventory

60,000

Note receivable

25,000

Interest receivable

0

Prepaid rent

4,000

Prepaid insurance

0

Equipment

80,000

Accumulated depreciation equipment

30,000

Accounts payable

28,000

Wages payable

0

Note payable

68,000

Interest payable

0

Unearned revenue

0

Common stock

60,000

Retained earnings

16,500

Sales revenue

148,000

Interest revenue

0

Cost of goods sold

70,000

Wage expense

18,900

Rent expense

11,000

Depreciation expense

0

Interest expense

0

Supplies expense

1,100

Insurance expense

9,000

Bad debt expense

3,000

Totals

353,500

353,500

Information necessary to prepare the year-end adjusting entries appears below.

Depreciation on the equipment for the year is $11,000.

The company estimates that of the $40,000 in accounts receivable outstanding at year-end, $5,200 probably will not be collected.

Employee wages are paid twice a month, on the 22nd for wages earned from the 1st through the 15th, and on the 7th of the following month for wages earned from the 16th through the end of the month. Wages earned from December 16 through December 31, 2011, were $3,000.

On October 1, 2011, Pastina borrowed $68,000 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 9%. The principal is due in 10 years.

On March 1, 2011, the company lent a supplier $25,000 and a note was signed requiring principal and interest at 11% to be paid on February 28, 2012.

On April 1, 2011, the company paid an insurance company $9,000 for a two-year fire insurance policy. The entire $9,000 was debited to insurance expense.

$900 of supplies remained on hand at December 31, 2011.

A customer paid Pastina $1,000 in December for 1,500 pounds of spaghetti to be manufactured and delivered in January 2012. Pastina credited sales revenue.

On December 1, 2011, $4,000 rent was paid to the owner of the building. The payment represented rent for December and January 2012, at $2,000 per month.

Required:

Prepare the necessary December 31, 2011, adjusting journal entries. (Round your answers to the nearest dollar amount.Omit the “$” sign in your response.)

Problem :

The general ledger of the Karlin Company, a consulting company, at January 1, 2011, contained the following account balances:

Account Title

Debits

Credits

Cash

30,000

Accounts receivable

15,000

Allowance for uncollectible accounts

500

Equipment

20,000

Accumulated depreciation

6,000

Salaries payable

9,000

Common stock

40,000

Retained earnings

9,500

Total

65,000

65,000

Sales of services, $100,000, of which $30,000 was on credit.

Collected on accounts receivable, $27,300.

Issued shares of common stock in exchange for $10,000 in cash.

Paid salaries, $50,000 (of which $9,000 was for salaries payable).

Paid miscellaneous expenses, $24,000.

Purchased equipment for $15,000 in cash.

Paid $2,500 in cash dividends to shareholders.

Requirement 1:

(Offline – not submitted or graded in this system). Prepare the necessary T-accounts, entering the beginning balances from the trial balance.

Requirement 2:

Prepare a general journal entry for each of the summary transactions listed above. (Omit the “$” sign in your response.)

Requirement 3:

Post the journal entries to the offline T-accounts.

Requirement 4:

Prepare an unadjusted trial balance. (Leave no cells blank – be certain to enter a 0 wherever required.Omit the “$” sign in your response.)

Requirement 5:

Prepare and post adjusting journal entries. Post to offline T-accounts. Accrued salaries at year-end amounted to $1,000. Depreciation for the year on the equipment is $2,000. The allowance for uncollectible accounts is estimated to be $1,500. (Omit the “$” sign in your response.)

Requirement 6:

Prepare an adjusted trial balance. (Omit the “$” sign in your response.)

Requirement 7:

Prepare an income statement for 2011 and a balance sheet as of December 31, 2011. (Amounts in parentheses do not require a minus sign. Input all amounts as positive values. Omit the “$” sign in your response.)

Requirement 8:

Prepare and post closing entries. (Omit the “$” sign in your response.)

Selected balance sheet information for the Wolf Company at November 30, and December 31, 2011, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit.

Nov. 30

Dec. 31

Debits

Credits

Debits

Credits

Accounts receivable

10,000

3,000

Prepaid insurance

5,000

7,500

Inventory

7,000

6,000

Accounts payable

12,000

15,000

Wages payable

5,000

3,000

The following cash flow information also is available:

Cash collected from credit customers $55,000.

Cash paid for insurance $8,000.

Cash paid to suppliers of inventory $44,000 (the entire accounts payable amounts relate to inventory purchases).

Cash paid to employees for wages $10,000.

Requirement 1:

Determine the following for the month of December. (Omit the “$” sign in your response.)

Requirement 2:

Prepare a summary journal entry to record the month’s sales and cost of those sales. (Omit the “$” sign in your response.)

Problem 2-6 Accounting cycle [LO2, 3, 4, 5, 6, 7]

The general ledger of the Karlin Company, a consulting company, at January 1, 2011, contained the following account balances:

Account Title

Debits

Credits

Cash

30,000

Accounts receivable

15,000

Allowance for uncollectible accounts

500

Equipment

20,000

Accumulated depreciation

6,000

Salaries payable

9,000

Common stock

40,000

Retained earnings

9,500

Total

65,000

65,000

The following is a summary of the transactions for the year:

Sales of services, $100,000, of which $30,000 was on credit.

Collected on accounts receivable, $27,300.

Issued shares of common stock in exchange for $10,000 in cash.

Paid salaries, $50,000 (of which $9,000 was for salaries payable).

Paid miscellaneous expenses, $24,000.

Purchased equipment for $15,000 in cash.

Paid $2,500 in cash dividends to shareholders.

Requirement 1:

(Offline – not submitted or graded in this system). Prepare the necessary T-accounts, entering the beginning balances from the trial balance.

Requirement 2:

Prepare a general journal entry for each of the summary transactions listed above. (Omit the “$” sign in your response.)

Requirement 3:

Post the journal entries to the offline T-accounts.

Requirement 4:

Prepare an unadjusted trial balance. (Leave no cells blank – be certain to enter a 0 wherever required.Omit the “$” sign in your response.)

Requirement 5:

Prepare and post adjusting journal entries. Post to offline T-accounts. Accrued salaries at year-end amounted to $1,000. Depreciation for the year on the equipment is $2,000. The allowance for uncollectible accounts is estimated to be $1,500. (Omit the “$” sign in your response.)

Requirement 6:

Prepare an adjusted trial balance. (Omit the “$” sign in your response.)

Requirement 7:

Prepare an income statement for 2011 and a balance sheet as of December 31, 2011. (Amounts in parentheses do not require a minus sign. Input all amounts as positive values. Omit the “$” sign in your response.)

Requirement 8:

Prepare and post closing entries. (Omit the “$” sign in your response.)

Requirement 9:

Prepare a post-closing trial balance. (Omit the “$” sign in your response.)