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Question 1: The following transactions for Carleton Company occurred during January 2016:

Question 1:

The following transactions for Carleton Company occurred during January 2016:

Jan.

1

Purchased a two-year insurance policy for cash, $8,400

 

4

Paid utilities bill received December 2015, $450

 

9

Performed a service on account, $1,200

 

16

Paid bimonthly salary to employees, $2,700

 

21

Received $800 from a customer on account

 

25

Received $600 from January 9 transaction

 

30

Prepared the adjusting entry for insurance from January 1 transaction

 

30

Accrued wages of $2,750

 

Required: Show the total amount of revenue and expense recognized under both the accrual basis and cash basis of accounting.

Accrual Basis

Revenue Total

 

Expense Total

 

 

Cash Basis

Revenue Total

 

Expense Total

 

 

Question 2:

On December 15, 2015, a public company receives an order from a customer for services to be performed on December 28, 2015. Due to a backlog of orders, the company does not perform the services until January 3, 2016. The customer pays for the services on January 6, 2016. When should revenue be recorded for the company? Why (support your argument with a principle from the textbook)?

 

Question 3:

Scranton Motors Ltd faced the following situations. Journalize the adjusting entry needed at year end for each situation. Each scenario should be considered independently. 

  1. The business has interest expense of $9,000 early in January 2017.
  2. Interest revenue of $3,000 has been earned but not yet received.
  3. When the business collected $12,000 in advance three months ago, the accountant debited Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in December, the other to be delivered in February 2017.
  4. Salary expense is $1,000 per day – Monday through Friday – and the business pays employees each Friday. For example purposes, assume that this year, December 31 falls on a Tuesday.
  5. The unadjusted balance of the Supplies account is $3,100. The total cost of supplies on hand is $800.
  6. Equipment was purchased at the beginning of this year at a cost of $60,000. The equipment’s useful life is five years. Record the depreciation for this year and then determine the equipment’s carrying amount. 

Question 4:

Prepare the required closing entries for the following selected accounts from the records of ShipIT Transportation Inc. at December 31, 2016

Cost of services sold

$11,600

Accumulated depreciation

17,800

Selling, general, and administrative expense

6,900

Retained earnings, December 31, 2015

1,900

Service revenue

23,600

Depreciation expense

4,100

Other revenue

600

Income tax expense

400

Dividends

400

Income tax payable

300

 
How much net income did ShipIT Transportation Inc. earn during the year ended December 31, 2016? Prepare a T-account for Retained Earnings to show the December 31, 2016 balance of Retained Earnings.

Question 5:

Academic Consultants Inc. had the following selected transactions in August 2016:

 

Aug.

1

Prepaid insurance for August through December, $1,000

 

4

Purchased software for cash, $800

 

5

Performed service and received cash, $900

 

8

Paid advertising expense, $300

 

11

Performed service on account, $3,000

 

19

Purchased computer on account, $1,600

 

24

Collected for the August 11 service

 

26

Paid account payable from August 19

 

29

Paid salary expense, $900

 

31

Adjusted for August insurance expense (see Aug 1)

 

31

Earned revenue of $800 that was collected in advance in July

 

Requirements

  1. Show how each transaction would be handled using the cash basis and the accrual basis. Under each column, give the amount of revenue or expense for August. Journal entries are not required. Use the following format for your answer, and show your computations.

    Academic Consultants Inc.

    Amount of Revenue (Expense) for August 2016

    Date

     

    Cash Basis

    Accrual Basis

    Aug

    1

    Revenue/(Expense)

    Amount

    Revenue/(Expense)

    Amount

  2. Compute August income (loss) before tax under each accounting method
  3. Explain which measure of net income or net loss is preferable.
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Question 1:
The following transactions for Carleton Company occurred during January 2016:
Jan. 1 Purchased a two-year insurance policy for cash, $8,400 4 Paid utilities bill received December 2015,...

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