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Ashford University ACC 205 Week Two Exercise Assignment – RoyalCustomEssays

Ashford University ACC 205 Week Two Exercise Assignment

Ashford University ACC 205 Week One Exercise Assignment
July 3, 2018
Ashford University ACC 205 Week Five Exercise Assignment
July 3, 2018

Week
2 Assignment
ACC
205
Date:

1. Recognition of
concepts. Jim Armstrong operates a small company that books enter­tainers
for theaters, parties, conventions, and so forth. The company’s fiscal year
ends on June 30. Consider the following items and classify each as either (1)
pre­paid expense, (2) unearned revenue, (3) accrued expense, (4) accrued
revenue, or (5) none of the foregoing.
a Interest owed on the company’s bank
loan, to be paid in early July b Professional
fees earned but not billed as of June 30
c Office supplies on hand at year-end
d An advance payment from a client for a
performance next month at a convention
e The payment in part (d) from the
client’s point of view
f Amounts paid on June 30 for a 1-year
insurance policy
g The bank loan payable in part (a)
h Repairs to the firm’s copy machine,
incurred and paid in June

2. Understanding the closing process. Examine
the following list of accounts:

Note Payable

Accumulated Depreciation: Building

Alex Kenzy, Drawing

Accounts Payable

Product Revenue

Cash

Accounts Receivable

Supplies Expense

Utility Expense

Which of the
preceding accounts
a. appear on a post-closing trial
balance?
b. are commonly known as temporary,
or nominal, accounts?
c. generate a debit to Income
Summary in the closing process?
d. are
closed to the capital account in the closing process?
3. Adjusting entries
and financial statements. The following information pertains to Sally
Corporation:
·
The company previously collected $1,500
as an advance payment for services to be rendered in the future. By the end of
December, one half of this amount had been earned.
·
Sally Corporation provided $1,500 of
services to Artech Corporation; no billing had been made by December 31.
·
Salaries owed to employees at year-end
amounted to $1,000.
·
The Supplies account revealed a balance
of $8,800, yet only $3,300 of supplies were actually on hand at the end of the
period.
·
The company paid $18,000 on October 1 of
the current year to Vantage Property Management. The payment was for 6 months’
rent of Sally Corporation’s headquarters, beginning on November 1.
Sally Corporation’s accounting year ends on December
31.
Instructions
Analyze
the five preceding cases individually and determine the following:
a.
The typeof adjusting entry needed at year-end (Use the following codes:
A, adjust­ment of a prepaid expense; B, adjustment of an unearned revenue; C,
adjustment to record an accrued expense; or D, adjustment to record an accrued
revenue.)
b.
The year-end journal entry to adjust the accounts
c.
The income statement impact of each adjustment (e.g., increases total revenues
by $500)
• The company previously collected $1,500 as an
advance payment for services to be rendered in the future. By the end of
December, one half of this amount had been earned.
1.)
B,
adjustment of an unearned revenue
2.)
Sally
Corporation provided $1,500 of services to Artech Corporation; no billing had
been made by December 31.
3.)
Salaries
owed to employees at year-end amounted to $1,000.
4.)
The
Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were
actually on hand at the end of the period.
5.)
The
company paid $18,000 on October 1 of the current year to Vantage Property
Management. The payment was for 6 months’ rent of Sally Corporation’s
headquarters, beginning on November 1.

4. Adjusting entries.
You have been retained to examine the records of Mary’s Day Care Center as of
December 31, 20X3, the close of the current reporting period. In the course of
your examination, you discover the following:
On January 1, 20X3, the
Supplies account had a balance of $1,350. During the year, $5,520 worth of
supplies was purchased, and a balance of $1,620 remained unused on December 31.

· Unrecorded
interest owed to the center totaled $275 as of December 31.
· All
clients pay tuition in advance, and their payments are credited to the Unearned
Tuition Revenue account. The account was credited for $65,500 on August 31.
With the exception of $15,500 all amounts were for the current semester ending
on December 31.
· Depreciation
on the school’s van was $3,000 for the year.
· On
August 1, the center began to pay rent in 6-month installments of $24,000. Mary
wrote a check to the owner of the building and recorded the check in Pre­paid
Rent, a new account.
· Two
salaried employees earn $400 each for a 5-day week. The employees are paid
every Friday, and December 31 falls on a Thursday.
· Mary’s
Day Care paid insurance premiums as follows, each time debiting Pre­paid
Insurance:

Date Paid

Policy No.

Length of Policy

Amount

Feb. 1, 20X2

1033MCM19

1 year

$540

Jan. 1, 20X3

7952789HP

1 year

912

Aug. 1, 20X3

XQ943675ST

2 years

840

Instructions

The center’s accounts were last adjusted on December
31, 20X2. Prepare the adjusting entries necessary under the accrual basis of
accounting.
A.
On
January 1, 20X3, the Supplies account had a balance of $1,350. During the year,
$5,520 worth of supplies was purchased, and a balance of $1,620 remained unused
on December 31.

B.
Unrecorded
interest owed to the center totaled $275 as of December 31
C.
All
clients pay tuition in advance, and their payments are credited to the Unearned
Tuition Revenue account. The account was credited for $65,500 on August 31.
With the exception of $15,500 all amounts were for the current semester ending
on December 31.

D.
Depreciation
on the school’s van was $3,000 for the year.

E. On
August 1, the center began to pay rent in 6-month installments of $24,000. Mary
wrote a check to the owner of the building and recorded the check in Prepaid
Rent, a new account.

F. Two salaried employees earn $400
each for a 5-day week. The employees are paid every Friday, and December 31
falls on a Thursday.

G. Mary’s
Day Care paid insurance premiums as follows, each time debiting Prepaid
Insurance:

5. Bank reconciliation and entries. The
following information was taken from the accounting records of Palmetto Company
for the month of January:

Balance per bank

$6,150

Balance per company records

3,580

Bank service charge for January

20

Deposits in transit

940

Interest on note collected by bank

100

Note collected by bank

1,000

NSF check returned by the bank with the bank
statement

650

Outstanding checks

3,080

Instructions:
a. Prepare Palmetto’s January bank
reconciliation.
b. Prepare any
necessary journal entries for Palmetto.

6. Direct write-off method. Harrisburg
Company, which began business in early 20X7, reported $40,000 of accounts
receivable on the December 31, 20X7, balance sheet. Included in this amount
was $550 for a sale made to Tom
Mattingly in July. On January 4, 20X8, the company learned that Mattingly had
filed for personal bankruptcy. Harrisburg uses the direct write-off method to
account for uncollectibles.

a. Prepare the journal entry
needed to write off Mattingly’s account.
b.
Comment on the ability of the direct write-off method to value receivables on
the year-end balance sheet.
7. Allowance method:
analysis of receivables. At a January 20X2 meeting, the presi­dent of Sonic
Sound directed the sales staff “to move some product this year.” The president
noted that the credit evaluation department was being disbanded be­cause it had
restricted the company’s growth. Credit decisions would now be made by the
sales staff.
By the end of the year,
Sonic had generated significant gains in sales, and the president was very
pleased. The following data were provided by the accounting department:

20X2

20X1

Sales

$23,987,000

$8,423,000

Accounts Receivable, 12/31

12,444,000

1,056,000

Allowance for Uncollectible Accounts, 12/31

?

23,000 cr.

The $12,444,000 receivables balance was aged as
follows:

Age of Receivable

Amount

Percentage of Accounts Expected to Be
Collected

Under 31 days

$4,321,000

99%

31260 days

4,890,000

90

61290 days

1,067,000

80

Over 90 days

2,166,000

60

Assume
that no accounts were written off during 20X2.
Instructions

a. Estimate
the amount of Uncollectible Accounts as of December 31, 20X2.
b. What
is the company’s Uncollectible Accounts expense for 20X2?
c. Compute
the net realizable value of Accounts Receivable at the end of 20X1 and 20X2.
d.
Compute the net realizable value at the
end of 20X1 and 20X2 as a percentage of respective year-end receivables
balances. Analyze your findings and comment on the president’s decision to
close the credit evaluation department.

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