Ex. 8

A review of the ledger of Nationwide Insurance LLC at December 31, 2016, produces the following data pertaining to the preparation of initial and adjusting entries:

 

     (a)    Received Cash upon signing a Notes Payable of $200,000. This is a 9-month note, dated September 1, 2014, with a 9% interest rate.

 

     (b)    Prepaid $540,000 for office rentals. During 2016, it signed 10 leases as shown below:

 

                                      Term              Monthly          Number of

              Date               (in months)     Rent                           Leases

              July 1                      12               $ 4,500          10

              

     (c)    Received $75,000 in advance on customer contracts. During 2016, the company entered into 5 monthly service contracts with clients. The clients prepaid for the services to be provided over the contract period in an even manner.

 

                             Service Period        Amount    Number of

              Date               (in months)     Per Contract  Contracts

              Nov 1                    6             $ 15,000                     5

 

     Instructions:

    1) Prepare the entry for the initial transaction when the note was signed, the rent was prepaid and the customer contract was paid in advance.

     2) Prepare the adjusting entries at December 31, 2016. Show all computations.

 

Ex. 9

Prepare year-end adjustments at December 31, 2016 for the following transactions. Make each adjustment using the proper journal entry form indicating Debit/Credit, accounts and the amount. Dates and explanations can be omitted.

 

1.    $10,000 of services have been performed for a client who paid in advance.

2.    Accrued interest on notes receivable is $500.

3.    Three years of rent, totaling $30,000, was paid in advance at the beginning of the year.

4.    Services totaling $2,900 had been performed but not yet billed at the end of the year.

5.    Depreciation on equipment totaled $6,500 for the year.

6.    Supplies purchased totaled $800. By year-end, only $200 of supplies remained.

7.    Salaries owed to employees at the end of the year total $9,500.

8.    Nine months of insurance, totaling $30,000, was paid in advance on October 1^st.

9.    Janitorial services of $5,000 were consumed but no invoice received from the vendor.

10.  Revenues of $75,000, Expenses of $40,000 and Dividends of $3,000 appear on Adjusted Trial Balance and need closed out to Retained earnings.

 

Example: Debit Unearned Revenue____________________________$100,000

                       Credit Service Revenue______________________________$100,000

 

 

 

 

 

 

 

 

Ex. 10

The following information is available for ABC Corporation for the year ended December 31, 2016:

 

        Collection of principal on long-term loan to a supplier                                              $16,000

        Acquisition of equipment for cash                                                                              10,000

        Proceeds from the sale of long-term investment at book value                                22,000

        Issuance of common stock for cash                                                                          20,000

        Depreciation expense                                                                                                 25,000

        Repayment of bonds payable at carrying (book) value                                             34,000

        Payment of cash dividends                                                                                          6,000

        Net income                                                                                                                 30,000

        Purchase of land by issuing bonds payable                                                               40,000

 

 

Ex. 10 (Cont.)

 

In addition, the following information is available from the comparative balance sheet for ABC Corporations at the end of 2015 and 2016:

                                                                                               2016                     2015  

        Cash                                                                           $148,000                $90,000

        Accounts receivable (net)                                              25,000                  10,000

        Prepaid insurance                                                         19,000                 12,000

        Total current assets                                                   $192,000              $112,000

 

        Accounts payable                                                      $ 30,000                $19,000

        Salaries and wages payable                                           6,000                   7,000

        Total current liabilities                                                $ 36,000                $26,000

 

Instructions:

ABC Corporation's statement of cash flows for the year ended December 31, 2016, using the indirect method.

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