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ul LTE [1' < El q 19. Richardson Auctioneers failed to record the following dated February 1 to illustrat adjusting entries at December 31,...

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8:214 .ul LTE [1' < El q 19. Richardson Auctioneers failed to record the following dated February 1 to illustrat
adjusting entries at December 31, the end of its fiscal pany can record its prepayml
year: (a) accrued expenses, 51500; 0’) “flue“ rev- '21. Dining Masters Magazine recs
enues, $1,700; and (c) amortization, $3,000. Did these subscriptions in advance and
omissions cause net income for the year to be under- as Subscription Revenue. At
stated or overstated, and by what overall amount? $1,400 of this revenue has I '20. A company pays $3,000 on February 1 to rent its office required year-end adjusting r for February, March, and April. Make journal entries . Make the grade with MyAccountinglab: The Starters. Exercises, and Problems
MyAccountIngLab on MyAcroumingLah. You can practise them as often as you want, and most instructions to help you find the right answer. STARTERS Starter 3-1 Sports Online Unlimited sells annual subscriptions for magazines that are
downloaded to customers monthly. The company collects cash in advance
and then downloads the magazines to subscribers each month. Suppose the
company collected $80,000 for subscriptions for January to December. Apply the recognition criteria for revenues to determine (1) what the com—
pany should record revenue for this situation and (2) the amount of revenue
the company should record for the Ianuary—through—March downloads. Starter 3—2 Suppose you work summers house-sitting for people while they are away on
vacation. Most of your customers pay you immediately after you finish a job.
A few ask you to send them a bill. It is now June 30 and you have collected
$600 from cash—paying customers. Your remaining customers owe you
$1,400. How much service revenue would you have under the (a) cash basis
and (b) accrual basis of accounting? Which method of accounting provides
more information about your house-sitting businss? Explain your answer. Starter 3—3 Smith Barnes Designers uses a sophisticated art program for its design
work. Suppose the company paid $5,000 for a Dell computer. Describe how
the company would account for the $5,” expenditure under (a) the cash
basis and (b) the accrual basis. State in your own words why the accrual
basis is more realistic for this situation. Starter 3—4 On April 1, 2014, you prepaid three months of rent, for a total of $18,003.
Give your adjusting entry to record rent expense at April 30, 2014. Include
the date of the entry and an explanation. Then, using T-accounts, post to the
two accounts involved, and show their balances at April 30. 2014. Starter 3—5 On May 1, your company paid cash of $27,000 for computers that are
expected to remain useful for three years. At the end of three years, the
value of the computers is expected to be zero. Hint: use the formula found
on page 133. Make journal entries to record (a) purchase of the computers on May 1 and
(b) amortintion on May 31. Include dates and explanations, and use the
following accounts: Computer Equipment; Accumulated Amortization—
Computer Equipment; and Amortization ExpenschComputer Equipment. Starter 3-6 Refer to the data in Starter 3—5. 1. Using T-accounts, post to the accounts listed in Starter 3—5, and show
their balances at May 31. 2. What is the computer equipment's carrying value at May 31? mm Questions cover Cheater 3 Aooendix tools. Previous Next
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8:21 ‘7 .emm LTE [1' [IIQ >g interest Starter 3—7 Suppose Ladner Environmental Services (LE) borrowed $50,000 an
expense March 1 by signing a note payable to Royal Bank. LEI-3's interest expense for
(a) the remainder or its fiscal year (March through May) is 5450 per month. 1. Make LES’s adjusting entry to accrue interest expense at May 31. Date the entry and include its explanation. 2. Using T-accounts, post to the two accounts affected by the adjustment.
unearned Starter 3-3 The Big Clipper Magazine collects cash from subscribers in advance and
revenues then mails the magazines to subscribers over a one—year period. Give the ® adjusting entry ttmt the company makes to record the earning of $10,000 of Subscription Revenue that was collected in advance. Include an explanation for the entry, as illustrated in the chapter. rual basis Starter 3-9 Starrs Bakery started 12 months ago as a supplier of gluten-free desserts to
® restaurants all over the province. During its first year of operations, it earned
$62,000 in revenues and $511110 in expenses. The business collected $5841”
from its customers and paid all but $2,500 to its suppliers. Starts also prepaid
$7.50) for prepaid rent and other expenses for the next year. Calculate the net
income under the cash basis and then under the accrual basis.
usted trial Starter 3—1 0 Scissors Hair Stylists hm begun the preparation of its adjusted trial balance
Maggi as follows:
4
[524‘550 “33038 IIAIR STYLISH
PrepII‘IIIIIII Ill Mlllmll 'I'I'lll BIIIIICI
BMW 31 , 2.14
lllllllllfllfl Mjllfllll
Trill Balance Minimum ‘I’rtal Belarus
mm m Goo—murmur! m.
Cash
Supplies
Equipment
Accumulated amortimfion—
equipmatt
Accounts payable
Interest payabte
Note payable
Suzanne Byrd, capital
Service revenue
Rmt expense
Supplies expense
Amortization expanse
Interest expense Year—end data: a. Supplies remaining on hand, $300 b. Amortization, $1,100 c. Accrued interest expense. $700 Complete the company's adjusted trial balance. Identify each adjustment by its letter. To save time, you may write your answer in the spaces pro—
vided on tl'm adjusted trial balance. Note: Starters 3-11 and 3—12 should be used only after completing Starter 3-10. 3asir Structure of Accounting 6 Previous

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5:06 all ’9 [1' < El q .- uunalrul‘. u-m vvhluu y"...- we “Io-u!— uu-wyuvllu van .1... alvl‘. a n‘rul no.“ u-mu-u‘ nu. .v. a. 2. Why did Ciocone take this action? 15 this action ethical? Give your reason, identifying the
parties helped and the parties harmed by Ciccone’s action. 3. As a personal friend, what advice would you give the accountant? PROBLEMS (GROUP A) MyAccountingLab Problem 3—1A
Kandi's Office Design had the following transactions during January: Jan. 1 Paid for insurance for January through March, $2,400. It is company policy
to record this sort of transaction in an asset account.
4 Perfumed design service on account, $7,0lI).
5 Purchased office furniture on account, $2,100.
8 Paid advertising expmse, $2,000 cash.
15 Purchased office equipment for cash, $4,500.
19 Performed design services and received cash, $9,000.
24 Collected $3,500 on account for the January 4 service.
26 Paid account payable from January 5.
29 Paid salaries expense, $7,500 cash.
31 Recorded adjusting entry for January insurance expense (see January 1). Required 1. Show how each transaction would be accounted for using the accrual basis of account~
ing. Use the format below for your answer, and show your computations. Give the
amount of revenue or expense for January. Journal entries are not required. Amount ot Revenue nr Expense for January Date Revenue (Expense) Accrual-Basie Amount 2. Compute January net income or net loss under the accrual basis of accounting.
3. State why the accrual basis of accounting is preferable to the cash basis. Problem 3—2A As the controller of Best Security Systems, you have hired a new bookkeeper, whom you
must train. She objects to making an adjusting entry for accrued salaries at the end of the
period. She reasons, ”We will pay the salaries soon. Why not wait until payment to record
the expense? In the end, the result will be the same." Write a business memo to explain to
the bookkeeper why the adjusting entry for accrued salaries expense is needed. This is the format of the business memo: Date: (fill in)
To: New Bookkeeper From: (Student Name)
Subject: Why the adjusting entry for salaries expense is needed Problem 3—3A
Joumalize the adjusting entry needed on December 31, the company’s year-end, for each of
the following independent cases affecting Eagle Communications: a. Each Friday the company pays its employees for the current week’s work. The amount
of the payroll is $15,000 for a five-day workweek. The current accounting period ends on
Wednesday. b. Eagle has received notes receivable from some clients for professional services. During the
current year, Eagle has earned interest revenue of $800, which will be received next year. Previous Next
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