NAME: LAST _____________ FIRST NAME______________PUID_________________
Please write your name in BLOCK letters and in the format: Last name, First name.
Management 200 Introductory Financial Accounting Spring 2010
Krannert School of Management - Purdue University
Homework 3 due Wednesday, February 17, 2010
IMPORTANT: This homework must be turned in on this sheet of pages (please staple). It is preferred that
you print it out two-sided if at all possible. Assignments not completed on this form will not be graded. The
grade for this assignment will be based on the correctness of a partial portion of the assignment the full
assignment will not be graded. Please print your name and PUID clearly and legibly in the spaces above.
PART A: Refer to the pre-closing trial balance for Carolina Corporation as at December
31, 2009. (See the solution to part c for homework 2).
Required:
a. Assuming Carolina Corporation uses an Income Summary Account during the
closing process, prepare the closing entries for Carolina Corporation as at
December 31, 2009.
Homework 3 continued over
Homework 3 continued
b. Briefly explain the two major objectives of the closing process.
c. Complete the ledger account for Retained Earnings for Carolina Corporation for
2009.
_____________________Retained Earnings______________________
Opening B: balance
42,023
PART Prepare journal entries to record the year-end adjustments required by
Dogwood Industries for the year ended December 31, 2009.
Required:
d. On July 1, 2009 Dogwood Industries purchased a new stamping machine for its
Lafayette factory at a cost of $72,000. The machine is expected to be in use for 6
years and then replaced. The estimated residual value of the machine at the end of
the 6 years is expected to be $0. Prepare the journal entry to record Depreciation
expense (Hint: You only need to record six months of depreciation).
Homework 3 continued over
Homework 3 continued
e. In transaction d. you used a Contra account. What is a contra account and what
is the benefit of using one in transaction d?
f. On July 1, 2009 Dogwood Industries paid $960 for a one- year insurance policy
for the new stamping machine and debited Prepaid Insurance. Prepare the
adjusting entry for insurance expense as at December 31, 2009.
g. Assume instead that on July 1, 2009 Dogwood Industries paid $960 for a oneyear insurance policy for the new stamping machine and debited Insurance
expense. Prepare the adjusting entry for insurance expense as at December 31,
2009.
h. Explain why the adjusting entry in g. is different from the entry in f.