ACCT 505 Chapter 2
ACCT 505 Chapter 2
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Problem 2-33 Effect of adjusting entries on the accounting equation LO 2-1, 2-2, 2-3, 2-4, 2-5, 2-6
Required
Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)
a.
Paid $6,300 cash in advance on April 1 for a one-year insurance policy.
b.
Purchased $1,750 of supplies on account. At year’s end, $130 of supplies remained on hand.
c.
Paid $6,300 cash in advance on March 1 for a one-year lease on office space.
d.
Received an $15,300 cash advance for a contract to provide services in the future. The contract required a one-year commitment starting September 1.
Problem 2-35 Effect of events on financial statements LO 2-1, 2-2, 2-3, 2-4, 2-5, 2-6
Davis Company had the following balances in its accounting records as of December 31, 2013:
Assets
Liabilities and Equity
Cash
$
51,000
Accounts Payable
$
25,000
Accounts Receivable
52,000
Common Stock
95,000
Land
30,000
Retained Earnings
13,000
Totals
$
133,000
$
133,000
The following accounting events apply to Davis for 2014:
Jan.
1
Acquired an additional $54,000 cash from the issue of common stock.
April
1
Paid $5,400 cash in advance for a one-year lease for office space.
June
1
Paid a $2,300 cash dividend to the stockholders.
July
1
Purchased additional land that cost $30,000 cash.
Aug.
1
Made a cash payment on accounts payable of $18,000.
Sept.
1
Received $8,600 cash in advance as a retainer for services to be performed monthly
during the next eight months.
Sept.
30
Sold land for $24,000 cash that had originally cost $24,000.
Oct.
1
Purchased $1,130 of supplies on account.
Dec.
31
Earned $56,000 of service revenue on account during the year.
31
Received $64,000 cash collections from accounts receivable.
31
Incurred $12,000 other operating expenses on account during the year.
31
Recognized accrued salaries expense of $5,600.
31
Had $200 of supplies on hand at the end of the period.
31
The land purchased on July 1 had a market value of $46,000.
31
Recognized $122 of accrued interest revenue.
31
Recognized the earning of cash received in advance for the lease for office space.
31
Recognized the cash received in advance for services to be performed monthly.
31
Recognized the earning of cash received in advance for the lease for office space.
31
Recognized the cash received in advance for services to be performed monthly.
Based on the preceding information for Davis Company answer the following questions. All questions pertain to the 2014 financial statements. (Hint: Record the events in general ledger accounts under an accounting equation before answering the questions.) (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)
What two additional adjusting entries need to be made at the end of the year? (Select all that apply.)
What amount would be reported for land on the balance sheet?
What amount of net cash flow from operating activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)
What amount of rent expense would be reported in the income statement? (Do not round intermediate calculations.)
What amount of total liabilities would be reported on the balance sheet?
What amount of supplies expense would be reported on the income statement?
What amount of unearned revenue would be reported on the balance sheet? (Do not round intermediate calculations.)
What amount of net cash flow from investing activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)
What amount of total expenses would be reported on the income statement? (Do not round intermediate calculations.)
What total amount of service revenue would be reported on the income statement? (Do not round intermediate calculations.)
What amount of cash flows from financing activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)
What amount of net income would be reported on the income statement? (Do not round intermediate calculations.)
What amount of retained earnings would be reported on the balance sheet? (Do not round intermediate calculations.)
Problem 2-36 Identifying and arranging elements on financial statements LO 2-7
The following accounts and balances were drawn from the records of Dawkins Company at December 31, 2014:
Cash $ 11,700 Accounts receivable $ 19,000 Land 38,000 Cash flow from operating act. 8,000 Insurance expense 1,000 Beginning retained earnings 9,230 Dividends 5,400 Beginning common stock 1,000 Prepaid insurance 2,300 Service revenue 81,000 Accounts payable 28,500 Cash flow from financing act. 5,200 Supplies 730 Ending common stock 5,400 Supplies expense 300 Cash flow from investing act. (7,500 ) Rent expense 2,700 Other operating expenses 43,000
Required
Use the accounts and balances from Dawkins Company to construct an income statement.
