ACC211 Chapter 3

ACC211 Chapter 3

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*Brief Exercise 3-1

Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions.   

Brief Exercise 3-3

	Your answer is correct.

On July 1, 2014, Crowe Co. pays $27,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.   

Brief Exercise 3-4

On July 1, 2014, Crowe Co. pays $9,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. Journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service  

Brief Exercise 3-5

	Your answer is correct.

Assume that on February 1, Procter & Gamble (P&G) paid $733,000 in advance for 1 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.   

Brief Exercise 3-6

	Your answer is correct.

LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $300 received in advance. Prepare LaBouche’s November 1 journal entry and the December 31 annual adjusting entry  

Brief Exercise 3-7 Your answer is correct. Dresser Company’s weekly payroll, paid on Fridays, totals $6,970. Employees work a 5-day week. Prepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the $6,970 cash payment on Friday, January 2.   Date Account Titles and Explanation Debit Credit Dec. 31 Salaries and Wages Expense 4,182     Salaries and Wages Payable     4,182 Jan. 2 Salaries and Wages Expense 2,788     Salaries and Wages Payable 4,182     Cash     6,970

Brief Exercise 3-8 Your answer is correct. Included in Gonzalez Company’s December 31 trial balance is a note receivable of $22,080. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez’s December 31 adjusting entry to record $552 of accrued interest, and the February 1 journal entry to record receipt of $22,816 from the borrower.

Brief Exercise 3-11

	Your answer is correct.

Side Kicks has year-end account balances of Sales Revenue $821,430; Interest Revenue $24,980; Cost of Goods Sold $568,730; Administrative Expenses $184,410; Income Tax Expense $32,460; and Dividends $18,441. Prepare the year-end closing entries 

Exercise 3-8 Your answer is correct. Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August. (a) At August 31, Roddick owed his employees $2,198 in salaries and wages that will be paid on September 1. (b) At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the bill would be approximately $710. (c) On August 1, Roddick borrowed $30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%. (d) A telephone bill in the amount of $148 covering August charges is unpaid at August 31. Prepare the adjusting journal entries as of August 31, 2014, suggested by the information above.

Exercise 3-10

Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. GRECO RESORT TRIAL BALANCE AUGUST 31, 2014 Debit Credit Cash $18,770 Prepaid Insurance 4,570 Supplies 2,770 Land 22,000 Buildings 122,000 Equipment 18,000 Accounts Payable $4,670 Unearned Rent Revenue 4,770 Mortgage Payable 62,000 Common Stock 91,170 Retained Earnings 9,900 Dividends 5,000 Rent Revenue 78,200 Salaries and Wages Expense 44,800 Utilities Expenses 9,200 Maintenance and Repairs Expense 3,600 Totals $250,710 $250,710 Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1, 2014. 2. An inventory count on August 31 shows $668 of supplies on hand. 3. Annual depreciation rates are (a) buildings (4%) (b) equipment (10%). Salvage value is estimated to be 10% of cost. 4. Unearned Rent Revenue of $4,131 was earned prior to August 31. 5. Salaries of $414 were unpaid at August 31. 6. Rentals of $839 were due from tenants at August 31. (Use Accounts Receivable account.) 7. The mortgage interest rate is 8% per year.