Ch03_Extra_Problems_withSolutions

Ch03_Extra_Problems_withSolutions - ACIS 3115 Problem 1:...

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ACIS 3115 Extra Problems for Chapter 3 Fall 2008 Problem 1: The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2006, trial balances contained the following account information: Nov. 30 Dec. 31 Dr. Cr. Dr. Cr. Supplies 1,500 3,000 Prepaid Insurance 6,000 4,500 Wages Payable 10,000 15,000 Unearned rent revenue 2,000 1,000 The following information is also known: a. The December income statement reported $2,000 in supplies expense. b. No insurance payments were made in December. c. $10,000 was paid to employees during December for wages. d. On November 1, 2006, a tenant paid Righter $3,000 in advance rent for the period November through January. Unearned rent was credited. Required: 1. What was the cost of supplies purchased during December? 2. What was the adjusting entry recorded at the end of December for prepaid insurance? 3. What was the adjusting entry recorded at the end of December for accrued wages? 4. What was the amount of rent revenue earned in December? What adjusting entry was recorded at the end of December for unearned rent? Problem 2: Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $100,000 from a local bank and the bank requires S&J to provide annual financial statements prepared on an accrual basis. During 2006, the following cash flows were recorded: Cash collected from customers $320,000 Cash paid for: Salaries $180,000 Supplies 25,000 Rent 12,000 Insurance 6,000 Miscellaneous 20,000 243,000 Net operating cash flow $ 77,000 You are able to determine the following information about accounts receivable, prepaid expenses and accrued liabilities: - 1 -
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ACIS 3115 Extra Problems for Chapter 3 Fall 2008 January 1, 2006 December 31, 2006 Accounts receivable $32,000 $27,000 Prepaid Insurance 0 2,000 Supplies 1,000 1,500 Accrued Liabilities (for miscellaneous expenses) 2,400 3,400 In addition, you learn that the bank loan was dated September 30, 2006, with principal and interest at 6% due in one year. Depreciation on the company’s equipment is $10,000 for the year. Required: Prepare an accrual-based income statement for 2006. (Ignore income taxes) Problem 3: Selected balance sheet information for the Wolf Company at November 30, and December 31, 2006, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit. Nov. 30 Dec. 31 Dr. Cr. Dr. Cr. Accounts receivable 10,00 0 3,000 Prepaid Insurance 5,000 7,500 Inventory 7,000 6,000 Accounts payable 12,000 15,000 Wages payable 5,000 3,000 The following cash flow information also is available: a. Cash collected from credit customers - $80,000 b. Cash paid for insurance - $5,000 c. Cash paid to suppliers of inventory - $60,000 (the entire accounts payable amounts relate to inventory purchases) d. Cash paid to employees for wages - $10,000 Required: 1. Determine the following for the month of December: a. Sales revenue
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Ch03_Extra_Problems_withSolutions - ACIS 3115 Problem 1:...

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