24th Edition

ISBN: 9781260158601

Author: Wild

Publisher: MCG

Concept explainers

The Effect Of Prepaid Taxes On Assets And Liabilities

Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can resu…

Final Accounts

Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.

Ledger Posting

A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the a…

Trial Balance and Final Accounts

In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately…

Adjustment Entries

At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial repor…

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Textbook Question

Chapter 3, Problem 6E

Preparing adjusting entries P1 P2 P3

Prepare adjusting journal entries for the year ended (date of) December 31 for each of these separate situations. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies; Prepaid Insurance; Prepaid Rent; Equipment; Accumulated Depreciation-Equipment; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Supplies Expense; Insurance Expense; Rent Expense; and Depreciation Expense-Equipment.

a. Depreciation on the company's equipment for the year is computed to be $18,000.

b. The Prepaid Insurance account had a $6,000 debit balance at December 31 before adjusting for the costs of any expired coverage. An analysis of the company's insurance policies showed that $1,100 of unexpired insurance coverage remains.

c. The Supplies account had a $700 debit balance at the beginning of the year; and $3,480 of supplies were purchased during the year. The December 31 physical count showed $300 of supplies available.

d. Two-thirds of the work related to $15,000 of cash received in advance was performed this period.

e. The Prepaid Rent account had a $6,800 debit balance at December 31 before adjusting for the costs of expired prepaid rent. An analysis of the rental agreement showed that $5,800 of prepaid rent had expired.

f. Wage expenses of $3,200 have been incurred but are not paid as of December 3 1.

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Chapter 3, Problem 5E

Chapter 3, Problem 7E

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JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)

Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true? a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.

Chapter 3 Solutions

Principles of Financial Accounting.

Ch. 3 - Prob. 1MCQ Ch. 3 - Prob. 2MCQ Ch. 3 - Prob. 3MCQ Ch. 3 - Prob. 4MCQ Ch. 3 - Prob. 5MCQ Ch. 3 - What is the difference between the cash basis and...Ch. 3 - Prob. 2DQ Ch. 3 - What type of business is most likely to select a...Ch. 3 - What is a prepaid expense and where is it reported...Ch. 3 - What type of assets requires adjusting entries to...

Ch. 3 - What contra account is used when recording and...Ch. 3 - Prob. 7DQ Ch. 3 - If a company initially records prepaid expenses...Ch. 3 - Prob. 9DQ Ch. 3 - Prob. 10DQ Ch. 3 - Samsung Assume Samsung has unearned revenue. What...Ch. 3 - Prob. 12DQ Ch. 3 - Question: QUICK STUDY Periodic reporting C1 Choose...Ch. 3 - Prob. 2QS Ch. 3 - Identifying accounting adjustments Classify the...Ch. 3 - Prob. 4QS Ch. 3 - Prepaid (deferred) expenses adjustments For each...Ch. 3 - Prob. 6QS Ch. 3 - Prob. 7QS Ch. 3 - Prob. 8QS Ch. 3 - Prob. 9QS Ch. 3 - Prob. 10QS Ch. 3 - Prob. 11QS Ch. 3 - Accrued expenses adjustments For each separate...Ch. 3 - Prob. 13QS Ch. 3 - Accrued revenues adjustments For each separate...Ch. 3 - Prob. 15QS Ch. 3 - Prob. 16QS Ch. 3 - Preparing an adjusted trial balance P5 Following...Ch. 3 - Prob. 18QS Ch. 3 - Prob. 19QS Ch. 3 - Prob. 20QS Ch. 3 - Prob. 21QS Ch. 3 - Prob. 22QS Ch. 3 - Prob. 1E Ch. 3 - Classifying adjusting entries P1 P2 P3 P4 In the...Ch. 3 - Question: Adjusting and paying accrued wages P3...Ch. 3 - Question: Determining cost flows through accounts...Ch. 3 - Prob. 5E Ch. 3 - Preparing adjusting entries P1 P2 P3 Prepare...Ch. 3 - Prob. 7E Ch. 3 - Analyzing and preparing adjusting entries P5...Ch. 3 - Prob. 9E Ch. 3 - Prob. 10E Ch. 3 - Question: Computing and interpreting profit margin...Ch. 3 - Prob. 12E Ch. 3 - Prob. 13E Ch. 3 - Preparing adjusting entries P1 P2 P3 P4 For each...Ch. 3 - Prob. 1AP Ch. 3 - Prob. 2AP Ch. 3 - Prob. 3AP Ch. 3 - Prob. 4AP Ch. 3 - Prob. 5AP Ch. 3 - Prob. 1BP Ch. 3 - Prob. 2BP Ch. 3 - Prob. 3BP Ch. 3 - Prob. 4BP Ch. 3 - Prob. 5BP Ch. 3 - Question: SERIAL PROBLEM Business Solutions P1 P2...Ch. 3 - Prob. 1AA Ch. 3 - Prob. 2AA Ch. 3 - Prob. 3AA Ch. 3 - Question: TAKING IT TO THE NET A1 Access EDGAR...

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Solution Summary: The author explains how to prepare an adjusting entry to record the depreciation expense for the year.

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