Assignment: Accruals and Adjustments
Part 1. Cash and Accrual Income
In 2012, Mixman Industries earned $85,000 from services provided and incurred $45,000 of expenses. At the end of the year, Mixman had received cash for $65,000 of the revenues and had paid $38,000 of the expenses. In addition, Mixman also received $10,000 in 2012 for services to be performance in 2013 and paid $6,000 in rent for the first 3 months of 2013.
a. Determine the 2012 net income under the cash basis of accounting. HINT:
b. Determine the 2012 net income under the accrual basis of accounting. HINT:
Part 2. Adjusting Journal Entry - Expense
Zipper Company records salaries expense each Friday when employees are paid. The company is preparing its financial statements on September 30, which is on a Thursday. Salaries are $10,000 per week, which breaks down to $2,000 per day for a 5 day work week.
a. Prepare any adjusting journal entry necessary on September 30. Enter your answers in the shaded areas of the journal below.
b. Is this situation a deferred or an accrued expense? Why?
c. Post the adjusting journal entry to the T-accounts below; include account names. Enter your answers in the shaded areas.
Part 3. Adjusting Journal Entry - Expense
On January 1, Davison Inc. bought equipment for $64,000 cash. Davison calculates a total of $4,000 of depreciation on the equipment for the year. Depreciation is recorded on an annual basis on December 31.
a. Prepare all journal entries relating to the purchase and depreciation of the equipment. Enter your answers in the shaded boxes of the journal below.
b. Post the December 31 journal entry to the relevant T-accounts below; include account names. Enter your answers in the shaded areas.
Part 4. Prepare Closing Entries
Barn Door Enterprises generates and records $74,000 of revenues and $28,000 of expenses during April. It also pays and records $3,200 in dividends for the month.
Prepare Barn Door's closing entries for the month of April. Enter your answers into the shaded areas of the journal below.
Part 5. Prepare Financial Statements and Closing Entries
The following is a partial adjusted trial balance for Tin Star Industries:
|
Tin Star Industries
Partial Adjusted Trial Balance
September 30
|
|
|
Debit
|
Credit
|
|
Retained Earnings
|
|
$20,150
|
|
Service Revenue
|
|
53,500
|
|
Advertising Expense
|
$ 4,200
|
|
|
Depreciation Expense
|
13,750
|
|
|
Interest Expense
|
3,560
|
|
|
Salaries Expense
|
8,000
|
|
|
Supplies Expense
|
5,500
|
|
|
Utilities Expense
|
5,080
|
|
|
Dividends
|
4,000
|
|
a. Prepare Tin Star's income statement for the month of September. Enter your answers in the shaded areas of the income statement below.
b. Prepare Tin Star's Statement of Retained Earnings for the month of September. Enter your answers in the shaded areas of the statement below.
c. Prepare the appropriate closing entries at September 30. Remember the hint for closing entries. Enter your answers in the shaded areas of the journal below. Also, be sure to list each expense individually; the first expense has been listed for you.