Apply It: Chapter 3 - Adjusting the Accounts

Apply It: Chapter 3 - Adjusting the Accounts

Directions: Be sure to read the following requirements for this assignment and address each of the stated criteria. There are four (4) questions total.

Your examination of the records of Southlake Co. shows the company collected $85,500 cash from customers and paid $48,400 cash for operating costs during 2021. If Southlake followed the accrual basis of accounting, it would report the following year-end balances: (2 points)

2021 2020

Accounts payable $ 1,310 $ 2,250

Accounts receivable 4,230 2,650

Accumulated depreciation 11,040 10,400

Prepaid insurance 1,580 1,250

Supplies 910 490

Unearned revenue 1,260 1,480

Determine Southlakes profit on a cash basis for 2021.

Answer:

Determine Southlakes profit on an accrual basis for 2021.

Answer:

Reyes Rides is owned by Jason Reyes. The company has an August 31 fiscal year end and prepares adjustments on an annual basis. The following is an alphabetical list of its accounts at

August 31, 2021, before adjustments. All accounts have normal balances.

Accounts Payable $ 5,700 J. Reyes, Drawings $141,000

Accounts Receivable 7,080 Notes Payable 162,000

Accumulated DepreciationEquipment 25,200 Prepaid Insurance 12,660

Accumulated DepreciationVehicles 175,500 Rent Expense 22,810

Cash 9,000 Salaries Expense 140,625

Equipment 40,320 Service Revenue 334,300

Fuel Expense 23,972 Supplies 4,455

Interest Expense 9,653 Unearned Revenue 25,000

J. Reyes, Capital 105,075 Vehicles 421,200

Additional information:

On August 31, a physical count shows $850 of supplies on hand.

The insurance policy has a one-year term that began on November 1, 2020.

The equipment has an estimated useful life of 10 years. The vehicles have an estimated useful life of 12 years.

The company collects cash in advance for any special services requested by customers. As at August 31, the company has provided all but $4,500 of these services.

The note payable has an annual interest rate of 4.5%. Interest is paid on the first day of each month.

Employees are paid a combined total of $545 per day. On August 31, 2021, five days of salaries are unpaid.

On August 31, the company provided $1,350 of services for a senior citizens group. The group was not billed for the services until September 2.

Additional fuel costs of $620 have been incurred but not recorded. (Use the Accounts Payable account.)

Instructions:

Prepare T-accounts and post the adjusting entries. Determine the closing balances for each account and whether it is a debit or credit closing balance. Note: Make sure to round off to the nearest dollar. (44 points)

Debit or Credit Closing Balance

Accounts Payable SelectAccounts Receivable SelectAccumulated DepreciationEquipment SelectAccumulated DepreciationVehicles SelectCash SelectDepreciation Expense SelectEquipment SelectFuel Expense SelectInsurance Expense SelectInterest Expense SelectInterest Payable SelectJ. Reyes, Capital SelectJ. Reyes, Drawings SelectNotes Payable SelectPrepaid Insurance SelectRent Expense SelectSalaries Expense SelectSalaries Payable SelectService Revenue SelectSupplies SelectSupplies Expense SelectUnearned Revenue SelectVehicles SelectPrepare an adjusted trial balance at August 31, 2021. Determine the debit and credit balances. (2 points)

Trial Balance Debit Balance Credit Balance

3) Butternut Squash Company has the following two notes receivable at May 31, 2021, its fiscal year end:

1. $50,000 six-month, 6% note issued January 1, 2021

2. $20,000 three-month, 5% note issued April 30, 2021

Interest is payable at maturity for both notes.

Calculate the accrued interest on both notes at May 31, 2021. (2 points)

Answer:

4) Cassist Enterprises began operations on January 1, 2021. During 2021 and 2022, the company entered into the following transactions:

2021 2022

1. Cash collected from customers during the year for services

provided that year. $50,250 $55,430

2. Accounts receivable at year end for services provided on account

during the year. 12,070 18,080

3. Cash collected from customers for services provided on account

the previous year. 0 12,070

4. Cash collected from customers for services to be provided the

following year. 4,580 1,760

5. Services provided to customers who had paid cash in advance

the previous year. 0 4,580

6. Cash paid for operating expenses incurred during the year. 17,380 18,990

7. Accounts payable at year end for operating expenses incurred

on account during the year. 2,199 3,120

8. Cash paid to creditors for operating expenses incurred on

account during the previous year. 0 2,199

Instructions

Calculate revenue, operating expenses, and profit for 2021 and 2022 using cash basis accounting. (6 points)

Cash Basis 2021 2022

Total Revenues Total Expenses Profit b) Calculate revenue, operating expenses, and profit for 2021 and 2022 using accrual basis accounting.

(6 points)

Accrual Basis 2021 2022

Total Revenues Total Expenses Profit

Apply It: Chapter 4 - Completion of the Accounting Cycle

Directions: Be sure to read the following requirements for this assignment and address each of the stated criteria. There are seven (7) questions total.

Daniels Dog Grooming has the following balances on November 30, 2021, after closing entries are posted: Cash $12,300; Prepaid Expenses $4,100; Equipment $60,000; Accumulated DepreciationEquipment $15,000; Accounts Payable $9,500; Unearned Revenue $15,250; D. Blaschuk, Capital $36,650.

Prepare a post-closing trial balance. Determine the balances in each and whether it is a debit or credit. (14 Points)

Account Debit or Credit Balances

Accounts Payable SelectAccumulated Depreciation - Equipment SelectCash SelectD. Blaschuk, Capital SelectEquipment SelectPrepaid Expenses SelectUnearned Revenue Select

Selected financial information is available for Jones Co.

Year 1Year 2Year 3

Current Assets $95,000 $150,000 $200,000

Current Liabilities 65,000 100,000 95,000

Calculate the working capital for Jones Co. for the three years. (3 points)

Calculate the current ratio (up to 2 decimal places) of Jones Co. for the three years.

(3 points)

Year 1 Year 2 Year 3

Working Capital Current Ratio Selected financial information is available on July 31 for Drew Co.

2021 2020

Cash and Accounts Receivable $22,680 $20,430

Current Assets 35,100 33,510

Current Liabilities 24,460 24,800

Calculate (a) working capital, (b) the current ratio (up to 2 decimal places), and (c) the acid-test ratio for 2020 and 2021. (6 points)

2020 2021

Working Capital Current Ratio Acid-test Ratio The accountant for Coulombe Company is almost finished preparing the worksheet for the year ended July 31, 2021. The totals of the accounts in the income statement and balance sheet columns are presented below.

Calculate the profit or loss, write this number in the proper columns, and calculate the final totals for these columns. Clearly indicate whether the company had a profit or a loss. Use the blue highlighted cells. (6 points)

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.

Totals 75,000 95,500 191,000 170,500

Profit or Loss Totals The accountant for Orange Line Company is almost finished preparing the worksheet for the year ended August 31, 2021. The totals of the accounts in the income statement and balance sheet columns are presented below.

Calculate the profit or loss, write this in the proper columns, and calculate the final totals for these columns. Clearly indicate whether the company had a profit or loss. Use the blue highlighted cells. (6 points)

Income Statement Balance Sheet

Dr. Cr. Dr. Cr.

Totals 53,875 43,425 55,550 66,000

Profit or Loss Totals Selected T-accounts for Victoire Esthetics on August 31, 2021, are as follows and closing entries.

B. Victoire, Capital 9,000 Aug. 1

2,000 Aug. 10

11000 Bal. Aug. 31

B. Victoire, Drawings Aug. 15 2,200 Aug. 25 2,500 Aug. 31 4700 Bal. Income Summary Aug. 31 8,000 15,000 Aug.31

7,000 Bal. Aug.31

Prepare a statement of owners equity for the month ended August 2021. (7 points)

Statement of Owners Equity

The following items were taken from the financial statements of J. Parra Company on December 31, 2021. (All amounts are in thousands.)

Long-term Debt $ 1,000 Accumulated DepreciationEquipment $ 5,655

Prepaid Insurance 880 Accounts Payable 1,444

Equipment 11,500 Notes Payable (due after 2022) 400

Long-term Investments 264 J. Parra, Capital 12,955

Short-term Investments 3,690 Accounts Receivable 1,696

Notes Payable (due in 2022) 500 Merchandise Inventory 1,256

Cash 2,668

Instructions:

Prepare a classified balance sheet in good form as of December 31, 2021. Template found below.

(a) What is the amount for Total Current Assets?

(b) What is the amount for Total Property, Plant, and Equipment?

(c) What is the amount for Total Assets?

(d) What is the amount for Total Current Liabilities?

(e) What is the amount for Total Liabilities?

(f) What is the amount for Total Liabilities and Owners Equity?

(12 points)