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Larry M. Walther & Christopher J. Skousen Accounting Cycle Exercises III Download free ebooks at bookboon.com 2 Accounting Cycle Exercises III © 2010 Larry M. Walther, Christopher J. Skousen & Ventus Publishing ApS. All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-630-8 Download free ebooks at bookboon.com 3 Contents Accounting Cycle Exercises III Contents Problem 1 Worksheet 1 Solution 1 6 6 8 Problem 2 Worksheet 2 Solution 2 9 9 11 Problem 3 Worksheet 3 Solution 3 12 12 13 Problem 4 Worksheet 4 Solution 4 14 15 16 Problem 5 Worksheet 5 Solution 5 17 18 19 Please click the advert The next step for top-performing graduates Masters in Management Designed for high-achieving graduates across all disciplines, London Business School’s Masters in Management provides specific and tangible foundations for a successful career in business. This 12-month, full-time programme is a business qualification with impact. In 2010, our MiM employment rate was 95% within 3 months of graduation*; the majority of graduates choosing to work in consulting or financial services. As well as a renowned qualification from a world-class business school, you also gain access to the School’s network of more than 34,000 global alumni – a community that offers support and opportunities throughout your career. For more information visit www.london.edu/mm, email mim@london.edu or give us a call on +44 (0)20 7000 7573. * Figures taken from London Business School’s Masters in Management 2010 employment report Download free ebooks at bookboon.com 4 Contents Accounting Cycle Exercises III Problem 6 Worksheet 6 Solution 6 20 21 22 Problem 7 Worksheet 7 Solution 7 23 24 28 Problem 8 Worksheet 8 Solution 8 33 34 35 Please click the advert Teach with the Best. Learn with the Best. Agilent offers a wide variety of affordable, industry-leading electronic test equipment as well as knowledge-rich, on-line resources —for professors and students. We have 100’s of comprehensive web-based teaching tools, lab experiments, application notes, brochures, DVDs/ CDs, posters, and more. See what Agilent can do for you. www.agilent.com/find/EDUstudents www.agilent.com/find/EDUeducators © Agilent Technologies, Inc. 2012 u.s. 1-800-829-4444 canada: 1-877-894-4414 Download free ebooks at bookboon.com 5 Problem 1: Worksheet Accounting Cycle Exercises III Problem 1 Following are three separate transactions that pertain to prepaid items. Evaluate each item and prepare the journal entries that would be needed for the initial recording and subsequent end-of-20X3 adjusting entry. Assume the company uses the balance sheet approach, and the initial recording is to an asset account. The company has a calendar year-end and does not make any adjusting entries prior to December 31. 1) 2) 3) The company purchased an 18-month insurance policy for $9,000 on June 1, 20X3. The company started 20X3 with $10,000 in supplies (this was previously recorded, and you do not need to make an entry for the beginning balance), purchased $15,000 in supplies during the year, and found only $6,500 in supplies on hand at the end of 20X3. The company paid $1,200 to rent a truck. The rental period began on December 16, 20X3, and ends on February 14, 20X4. Worksheet 1 GENERAL JOURNAL Date Accounts Debit Credit Accounts Debit Credit Jun. 1 Dec. 30 GENERAL JOURNAL Date Various Dec. 31 Download free ebooks at bookboon.com 6 Problem 1: Worksheet Accounting Cycle Exercises III GENERAL JOURNAL Date Accounts Debit Credit Dec. 16 Dec. 31 Download free ebooks at bookboon.com 7 Problem 1: Solution Accounting Cycle Exercises III Solution 1 GENERAL JOURNAL Date Jun. 1 Accounts Debit Prepaid Insurance Credit 9,000 Cash 9,000 Purchased 18-month policy Dec, 30 Insurance Expense 3,500 Prepaid Insurance 3,500 To record expiration of 7 months of coverage (7/18 X $9,000) GENERAL JOURNAL Date Various Accounts Debit Supplies Credit 15,000 Cash 15,000 Purchased supplies Dec. 31 Supplies Expense 18,500 Supplies 18,500 To record supplies used ($10,000 beginning + $15,000 purchased $6,500 remaining) GENERAL JOURNAL Date Dec. 16 Accounts Debit Prepaid Rent Credit 1,200 Cash 1,200 Rented a truck for 60 days Dec. 31 Rent Expense 300 Prepaid Rent 300 To record use of truck for 15 days (15/60 X $1,200) Download free ebooks at bookboon.com 8 Problem 2: Worksheet Accounting Cycle Exercises III Problem 2 Caritas Publishing issues the Weekly Welder. The company’s primary sources of revenue are sales of subscriptions to customers and sales of advertising in the Weekly Welder. Caritas owns its building and has excess office space that it leases to others. The following transactions involved the receipt of advance payments. Prepare the indicated journal entries for each set of transactions. 1) 2) 3)  n September 1, 20X7, the company received a $48,000 payment from an advertising client for O a 6-month advertising campaign. The campaign was to run from November, 20X7, through the end of April, 20X8. Prepare the journal entry on September 1, and the December 31 end-of-year adjusting entry. The company began 20X7 with $360,000 in unearned revenue relating to sales of subscriptions for future issues. During 20X7, additional subscriptions were sold for $3,490,000. Magazines delivered during 20X7 under outstanding subscriptions totaled $3,060,000. Prepare a summary journal entry to reflect the sales of subscriptions, and the end-of-year adjusting entry to reflect magazines delivered. The company received a $9,000 rental payment on December 16, 20X7, for the period running from mid-December to Mid-January. Prepare the December 16 journal entry, as well as the December 31 end-of-year adjusting entry Worksheet 2 GENERAL JOURNAL Date Accounts Debit Credit Accounts Debit Credit Sep. 1 Dec. 31 GENERAL JOURNAL Date Various Dec. 31 Download free ebooks at bookboon.com 9 Problem 2: Worksheet Accounting Cycle Exercises III GENERAL JOURNAL Date Accounts Debit Credit Dec. 16 Please click the advert You’re full of energy and ideas. And that’s just what we are looking for. © UBS 2010. All rights reserved. Dec. 31 Looking for a career where your ideas could really make a difference? UBS’s Graduate Programme and internships are a chance for you to experience for yourself what it’s like to be part of a global team that rewards your input and believes in succeeding together. Wherever you are in your academic career, make your future a part of ours by visiting www.ubs.com/graduates. www.ubs.com/graduates Download free ebooks at bookboon.com 10