ACC 107 Week 3 Assignment (2015)

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: Cash actually received
and expenses actually paidduring the
year.

Revenue

=

-Expenses

=

Net Income

=

b. Determine
the 2012 net income under the accrual
basis of accounting. HINT: Revenue actually earned and expenses actually incurred
during the year.

Revenue

=

-Expenses

=

Net Income

=

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.

General
Journal

Date

Account Names

Debit

Credit

Sept. 30

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.

General
Journal

Date

Account Names

Debit

Credit

Jan 1

Dec 31

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.

Hint: Dividends are not an expense, but distributions
to a company’s owners. The closing process transfers all revenue, expense, and
dividend account balances to Retained Earnings. One entry is made for revenues,
one for expenses, and one for dividends. The closing process only closes
revenue, expense, and dividend accounts.

General
Journal

Date

Account Names

Debit

Credit

April 30

April 30

April 30

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.

Tin
Star Industries
Income
Statement
For
the Month Ending September 30

Service
Revenue

Expenses:

Advertising
expense

Depreciation
expense

Interest
Expense

Salaries
Expense

Supplies
Expense

Utilities Expense

Total
Expenses

Net Income

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.

Tin Star Industries
Statement of Retained
Earnings
For the Month Ending September 30

Beginning retained
earnings, September 1

+Net income

-Dividends

Ending retained earnings,
September 30

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.

General
Journal

Date

Account Names and Explanation

Debit

Credit

Sept. 30

To close revenue.

Sept. 30

Advertising Expense

4,200

To close expenses.

Sept. 30

To close dividends.