Be104 Homework 2-Kimberley Brown

10/17/2016
BE104Homework#2KimberleyBrown
Student:KimberleyBrown
Date:10/17/16
Instructor:InternationalCollegeCayman
Islands
Assignment:BE104Homework#2
Course:BE104Fall2016
1. TheBlueNileLawFirmprepaysforadvertisinginthelocalnewspaper.OnJanuary1,thelawfirmpaid$3,000for
fourmonthsofadvertising.
HowmuchadvertisingexpenseshouldBlueNileLawFirmrecordforthetwomonthsendingFebruary28underthe
a.cashbasis?
b.accrualbasis?
ReviewOnly
ClicktheicontoseetheWorkedSolution.
a. Underthecashbasis,BlueNileLawFirmwillrecord$
3,000 ofadvertisingexpenseforthetwomonths
endingFebruary28.
b. Undertheaccrualbasis,BlueNileLawFirmwillrecord$
1,500 ofadvertisingexpenseforthetwomonths
endingFebruary28.
2. PeacefulHomeprovideshousesittingforpeoplewhiletheyareawayonvacation.Someofitscustomerspayimmediately
afterthejobisfinished.Somecustomersaskthatthebusinesssendthemabill.Asoftheendoftheyear,
PeacefulHomehascollected$700fromcashpayingcustomers.PeacefulHome'sremainingcustomersowethebusiness
$1,500.
HowmuchservicerevenuewouldPeacefulHomehavefortheyearunderthe
a.cashbasis?
b.accrualbasis?
ReviewOnly
a. Underthecashbasis,PeacefulHomewillrecord$
b. Undertheaccrualbasis,PeacefulHomewillrecord$
https://xlitemprod.pearsoncmg.com/api/v1/print/accounting
700 ofservicerevenuefortheyear.
2,200 ofservicerevenuefortheyear.
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3. AselectlistoftransactionsforAnuradha's Goalsfollows:
1
(Clicktheicontoviewthetransactions.)
Foreachtransaction,identifywhattypeofadjustingentrywouldbeneeded.Selectfromthefollowingfourtypesof
adjustingentries:deferredexpense,deferredrevenue,accruedexpense,accruedrevenue.
Apr.
Paidsixmonthsofrent,$4,800.
Deferredexpense
10
Received$1,200fromcustomerforsixmonthservicecontractthatbeganApril1.
Deferredrevenue
15
Purchasedacomputerfor$1,000.
Deferredexpense
18
Purchased$300ofofficesuppliesonaccount.
Deferredexpense
30
Workperformedbutnotyetbilledtocustomer,$500
Accruedrevenue
30
Employeesearned$600insalariesthatwillbepaidMay2.
Accruedexpense
1:MoreInfo
Apr.
Paidsixmonthsofrent,$4,800.
10
Received$1,200fromcustomerforsixmonthservicecontractthatbeganApril1.
15
Purchasedacomputerfor$1,000.
18
Purchased$300ofofficesuppliesonaccount.
30
Workperformedbutnotyetbilledtocustomer,$500.
30
Employeesearned$600insalariesthatwillbepaidMay2.
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4. ConsiderthefollowingsituationsforKirklandWeldingServices:
2
(Clicktheicontoviewthesituations.)
JournalizetheadjustingentryneededonDecember31foreachsituation.Usetheletterstolabelthejournalentries.
(Recorddebitsfirst,thencredits.Selecttheexplanationonthelastlineofthejournalentrytable.)
ReviewOnly
a.DepreciationforthecurrentyearincludesEquipment,$2,700.
Date
(a)Dec.31
AccountsandExplanation
Debit
DepreciationExpenseEquipment
Credit
2,700
2,700
AccumulatedDepreciationEquipment
Torecorddepreciationonequipment.
b.EachMonday,Kirklandpaysemployeesforthepreviousweek'swork.Theamountofweeklypayrollis$3,500fora
sevendayworkweek(MondaytoSunday).Thisyear,December31fallsonThursday .
Date
(b)Dec.31
Debit
SalariesExpense
Credit
2,000
2,000
SalariesPayable
Toaccruesalariesexpense.
c.ThebeginningbalanceofOfficeSupplieswas$2,600.Duringtheyear,Kirklandpurchasedofficesuppliesfor
$2,500,andatDecember31theofficesuppliesonhandtotaled$1,800.(AssumethatKirklanddebitsanassetaccount
whensuppliesarepurchased.)
Date
(c)Dec.31
Debit
Credit
SuppliesExpense
3,300
OfficeSupplies
3,300
Torecordofficesuppliesused.
d.Kirklandprepaidatwofullyears'insuranceonOctober1ofthecurrentyear,$6,480.Recordinsuranceexpenseforthe
yearendedDecember31.(WhenthepolicywaspurchasedonOctober1,assumethatKirklanddebitedanassetaccount.)
Date
(d)Dec.31
Debit
InsuranceExpense
PrepaidInsurance
Credit
810
810
Torecordinsuranceexpense.
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e.Kirklandhadearned$3,400ofunearnedrevenue.(Whenthecashwasreceived,assumethataliabilityaccountwas
credited.)
Date
(e)Dec.31
Debit
UnearnedRevenue
Credit
3,400
3,400
ServiceRevenue
Torecordservicerevenuethatwascollectedinadvance.
f.Kirklandhadincurred(butnotrecorded)$150ofinterestexpenseonanotepayable.Theinterestwillnotbepaiduntil
February28.
Date
(f)Dec.31
Debit
InterestExpense
Credit
150
150
InterestPayable
Toaccrueinterestexpense.
g.Kirklandbilledcustomers$9,000forweldingservicesperformed.
Date
(g)Dec.31
Debit
AccountsReceivable
ServiceRevenue
Credit
9,000
9,000
Toaccrueservicerevenue.
2:MoreInfo
a. Depreciationforthecurrentyearincludesequipment,$2,700.
b. EachMonday,Kirklandpaysemployeesforthepreviousweek'swork.Theamountofweeklypayrollis$3,500fora
sevendayworkweek(MondaytoSunday).Thisyear,December31fallsonThursday .
c. ThebeginningbalanceofOfficeSupplieswas$2,600.Duringtheyear,Kirklandpurchasedofficesuppliesfor
$2,500,andatDecember31theofficesuppliesonhandtotaled$1,800.
d. Kirklandprepaidatwofullyears'insuranceonOctober1ofthecurrentyear,$6,480.Recordinsuranceexpensefor
theyearendedDecember31.
e. Kirklandhadearned$3,400ofunearnedrevenue.
f. Kirklandhadincurred(butnotrecorded)$150ofinterestexpenseonanotepayable.Theinterestwillnotbepaiduntil
February28.
g. Kirklandbilledcustomers$9,000forweldingservicesperformed.
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10/17/2016
YOUANSWERED:
Date
(b)Dec.31
Debit
SalariesPayable
Cash
Credit
2,500
nothing
nothing
2,500
nothing
nothing
nothing
nothing
nothing
nothing
Toaccruesalariesexpense.
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10/17/2016
5. TheadjustedtrialbalanceofBlumeIrrigationSystematDecember31,2016,follows:
3
(Clicktheicontoviewtheadjustedtrialbalance.)
Readtherequirements 4.
Requirement1.Preparethecompany'sincomestatementfortheyearendedDecember31,2016.(Ifaboxisnotusedin
thestatement,leavetheboxemptydonotselectalabelorenterazero.Useaminussignorparenthesestoshowanet
loss.)
BlumeIrrigationSystem
IncomeStatement
YearEndedDecember31,2016
Revenues:
ServiceRevenue
Expenses:
InsuranceExpense
SalariesExpense
15,700
SuppliesExpense
1,600
InterestExpense
1,200
2,000
DepreciationExpenseBuilding
1,900
TotalExpenses
NetIncome(Loss)
75,800
800
23,200
52,600
Requirement2.Preparethecompany'sstatementofowner'sequityfortheyearendedDecember31,2016.Assumethat
therewerenocontributionsmadebytheownerduringtheyear.
Enteranyincreasesincapitalpriortothesubtotalandanydecreasestocapitalbelowthesubtotal.(Useaminussignor
parenthesestoshowadecreaseincapital.Excludeanyzerobalanceeventsfortheperiodfromthestatementofowner's
equity.)
StatementofOwner'sEquity
YearEndedDecember31,2016
Blume,Capital,January1,2016
52,600
Netincomefortheyear
82,600
(2,500)
Ownerwithdrawal
Blume,Capital,December31,2016
30,000
80,100
Requirement3.Preparethecompany'sclassifiedbalancesheetinreportformatDecember31,2016.(Ifaboxisnotused
inthebalancesheet,leavetheboxemptydonotselectalabelorenterazero.)
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BalanceSheet
December31,2016
Assets
CurrentAssets:
Cash
AccountsReceivable
47,500
OfficeSupplies
3,790
PrepaidInsurance
4,600
TotalCurrentAssets
PlantAssets:
$
56,100
Building
Less:
Equipment
28,000
Less:
(6,500)
TotalPlantAssets
(25,000)
AccumulatedDepreciationBuilding
TotalAssets
49,710
105,600
31,100
21,500
52,600
158,200
Liabilities
CurrentLiabilities:
AccountsPayable
SalariesPayable
3,500
UnearnedRevenue
1,300
InterestPayable
TotalCurrentLiabilities
42,000
1,200

LongtermLiabilities:
30,100
78,100
NotesPayable(longterm)
TotalLiabilities
48,000
Owner'sEquity
Blume,Capital,December31,2016
TotalLiabilitiesandOwner'sEquity
80,100
158,200
Requirement4.JournalizetheclosingentriesforBlumeIrrigationSystem.(Recorddebitsfirst,thencredits.Selectthe
explanationonthelastlineofthejournalentrytable.)
Startbyclosingrevenues.
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Date
Dec.31
Debit
ServiceRevenue
Clos.(1)
Credit
75,800
75,800
IncomeSummary
Tocloserevenue.
Closeexpensesfortheperiod.
Date
Dec.31
Debit
IncomeSummary
Credit
23,200
Clos.(2)
SalariesExpense
15,700
SuppliesExpense
1,600
1,900
2,000
InsuranceExpense
800
InterestExpense
1,200
Tocloseexpenses.
CloseIncomeSummary.
Date
Dec.31
Debit
Credit
IncomeSummary
52,600
Blume,Capital
52,600
Clos.(3)
TocloseIncomeSummary.
Closewithdrawals.
Date
Dec.31
Debit
Blume,Capital
Clos.(4)
Blume,Withdrawals
Credit
2,500
2,500
Toclosewithdrawals.
Requirement5.Computethecompany'scurrentratioatDecember31,2016.AtDecember31,2015,thecurrentratiowas
1.8.Didthecompany'sabilitytopaydebtsimproveordeteriorate,ordiditremainthesame?
Selectthelabelsthenentertheamountsandcomputethecurrentratio.(Roundyouranswertotwodecimalplaces.)
Totalcurrentassets
$
105,600
/
/
Totalcurrentliabilities
$
48,000
Currentratio
2.2
Sincethecurrentratiowas1.8oneyearago,Blume's abilitytopayitscurrentliabilitieshas improved

.
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10/17/2016
3:DataTable
AdjustedTrialBalance
December31,2016
Balance
AccountTitle
Cash
Debit
$
Credit
49,710
47,500
OfficeSupplies
3,790
PrepaidInsurance
4,600
AccountsReceivable
Equipment
28,000
Building
6,500
56,100
AccumulatedDepreciationBuilding
25,000
AccountsPayable
42,000
InterestPayable
1,200
SalariesPayable
3,500
UnearnedRevenue
1,300
NotesPayable(longterm)
30,100
Blume,Capital
30,000
2,500
75,800
800
SalariesExpense
15,700
SuppliesExpense
1,600
InterestExpense
1,200
2,000
1,900
Blume,Withdrawals
ServiceRevenue
InsuranceExpense
Total
215,400 $
215,400
4:Requirements
1. Preparethecompany'sincomestatementfortheyearendedDecember31,2016.
2. Preparethecompany'sstatementofowner'sequityfortheyearendedDecember31,2016.Assumethattherewere
nocontributionsmadebytheownerduringtheyear.
3. Preparethecompany'sclassifiedbalancesheetinreportformatDecember31,2016.
4. JournalizetheclosingentriesforBlumeIrrigationSystem.
5. Computethecompany'scurrentratioatDecember31,2016.AtDecember31,2015,thecurrentratiowas1.8.Did
thecompany'sabilitytopaydebtsimproveordeteriorate,ordiditremainthesame?
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YOUANSWERED:
BalanceSheet
December31,2016
Assets
CurrentAssets:
Cash
AccountsReceivable
47,500
OfficeSupplies
3,790
PrepaidInsurance
4,600
nothing
nothing
nothing
nothing
TotalCurrentAssets
PlantAssets:
49,710
56,100
Building
Less: DepreciationExpenseBuilding
Equipment
28,000
Less: DepreciationExpenseEquipment
(6,500)
TotalPlantAssets
105,600
TotalAssets
(25,000)
31,100
21,500
52,600
158,200
10/10

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