Chap 2 in class problems

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Arizona State University *

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340

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Accounting

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Feb 20, 2024

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ACC 340 -- Shields In-Class Practice Problems Adjusting and Closing Entries and Preparation of Financial Statements The following trial balance was taken from the books of Fisk Corporation on December 31, 2022. Ignore Income Taxes in this problem. Account Debit Credit Cash $ 9,000 Accounts Receivable 40,000 Allowance for Doubtful Accounts $ 1,800 Notes Receivable 10,000 Inventory 34,000 Prepaid Insurance 4,800 Equipment 100,000 Accumulated Depreciation--Equip. 15,000 Accounts Payable 10,800 Common Stock (44,000 shares issued and outstanding) 44,000 Retained Earnings 55,000 Sales Revenue 260,000 Cost of Goods Sold 126,000 Salaries and Wages Expense 50,000 Rent Expense 12,800 Totals $386,600 $386,600 A. At year end, the following items have not yet been recorded. Prepare the necessary adjusting entries and post them to the General Ledger t-accounts on the following page. a. Insurance expired during the year, $2,000. b. Estimated bad debts, 1% of gross sales. c. Depreciation on equipment, 10% per year on original cost (no salvage value assumed). d. Interest at 6% is receivable on the note for one full year. e. Rent paid in advance at December 31, $5,400 (originally charged to expense). f. Accrued salaries and wages at December 31, $5,800. 1

9,000 40,000 1,800 10,000 0 34,000 4,800 0 100,000 15,000 10,800 0 44,000 55,000 260,000 0 126,000 50,000 12,800 0 0 0 Fisk Corporation General Ledger Accumulated Depreciation Accounts Payable Cash Accounts Receivable Notes Receivable Allowance for Doubtful Accounts Interest Receivable Inventory Prepaid Insurance Prepaid Rent Salaries and Wages Payable Rent Expense Insurance Expense Common Stock Retained Earnings Sales Revenue Interest Revenue Cost of Goods Sold Salaries and Wages Expense Expense Depreciation Income Summary Bad Debt Expense Equipment 2

B. Prepare the necessary closing entries for Fisk Corporation as of December 31, 2022 and post them to the General Ledger t-accounts on the previous page, using the Income Summary account. C. Prepare Fisk Corporation’s Income Statement for the year ending December 31, 2022. Use the Multiple Step format, and include Earnings per Share. D.Prepare Fisk Corporation’s Balance Sheet as of December 31, 2022. Show appropriate section headings and titles. 3

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Cash-to-Accrual Grier & Associates (a consulting firm) maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows: Grier & Associates Income Statement (Cash Basis) For the Year Ended December 31, 2022 Cash receipts from customers $425,000 Cash payments: Salaries and wages $170,000 Income taxes 65,000 Insurance 40,000 Interest 25,000 300,000 Net income $125,000 Additional information: Balances at 12/31 2019 2018 Accounts receivable $50,000 $30,000 Salaries and wages payable 10,000 20,000 Income taxes payable 24,000 19,000 Prepaid insurance 8,000 4,000 Accumulated depreciation 95,000 80,000 Interest payable 3,000 9,000 No plant assets were sold during 2018. Prepare Grier & Associates’ single-step Income Statement (Accrual Basis) for the year ended December 31, 2022. You may use the T-account worksheet on the next page. Do not include an Earnings per Share calculation: Grier & Associates Income Statement For the year ended December 31, 2022 4

30,000 20,000 19,000 50,000 10,000 24,000 4,000 80,000 9,000 8,000 95,000 3,000 Wages Expense Income Tax Expense Insurance Expense Depreciation Interest Expense Prepaid Insurance Depreciation Interest Payable Services Revenue Salaries and Fisk Corporation General Ledger Cash Accounts Receivable Wages Payable Taxes Payable Accumulated Salaries and Income 5