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SMG AC 221 Study Guide - Midterm Guide: Deferral, Accrued Interest, Retained Earnings

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greenmink711
23 Oct 2018
School
Boston University
Department
Accounting
Course
SMG AC 221
Professor
Moshe Hagigi

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Document Summary

Stockholders" equity (-) decrease debit | increase credit (+) Retained earnings (-) dividends (-) (-) treasury stock (-) Liabilities (+) increase debit | decrease credit (-) Accounts receivable (-) allowance for doubtful accounts (-) Long-term investments (-) decrease debit | increase credit (+) Premium on bonds payable (-) discount on bonds payable (-) Expenses (-) decrease debit | increase credit (+) Gain on sale of pp&e (-) sales discount (-) (-) sales returns (-) (-) credit card discount (-) (+) increase debit | decrease credit (-) Back bay tutors | (617) 380-8066 | www. backbaytutors. com | page 1 of 4. : assets, dividends, expenses increase on the debit side. Situation in which cash has been collected from customers, but goods have not been delivered yet or services have not been performed yet. Situation in which cash has been paid for an expense, but the expense has not been incurred yet.

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Related Questions

Using the Option 1 spreadsheet (linked at the bottom of this page), review the journal entries, Peerless (P) company entries for 20x7, and the book value calculation for Peerless Company.

Required information:
1). Required entry for investment equity using case
2a). Record of parent 100% share of subsidiary 20x7 income
2b). Record of parent 100% share of subsidiary’s 20x7 dividend
3). Book value calculation for Investment value on December 30, 20x7

Follow instructions from the worksheet carefully. Use formulas to enter amounts and data. Show details of your calculations and processes. Explain each journal entry or why one was omitted. Do not hard code numbers in the Excel Worksheet.

Peerless Products (parent company) purchased on January 02, 20x7, Special Foods (subsidiary) for $300,000.
Information for acquisition entry for January 02, 20x7.
Peerless Products Fair Value Consideration: $300,000
Special Foods book value of equity:
Common stock $100,000
Paid in capital 50,000
Retained earnings 150,000
1). Required entry for investment equity using cash
1/2/20x7 Debit $xxxx
Credit $xxxx
2). Information to complete the parent company January to December 20x7 entries
Parent Subsidiary
Common stock, January 02, 20x7 $600,000 $100,000
Paid in capital 100,000 50,000
Retained earnings 300,000 150,000
Separate operating income - parent 200,000
Net income - subsidiary 100,000
Dividends 100,000 50,000
2A). Parent company entry for the year
Debit $xxxx
Credit $xxxx
Record of parent 100% share of subsidiary 20x7 income
2B) Parent company entry of the year
Debit $xxx
Credit $XXX
Record parent 100% share of subsidiaries 20x7 dividend
3). Book value calculation for investment value on December 30, 20x7
Total investments equals Common stock Paid In capital Retained earnings
Original book value $xxx $xxx $xxx $xxx
Net income XXX XXX
Less dividends XXX XXX
Ending book value XXX XXX XXX XXX

Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services.
Customer is Civic Corporation 1
Tax consulting begins on November 1st and runs through the next April 11/1/X7
Date of contract 11/1/X7
Length of consulting services 6 months months
Tax return preparation occurs over the period February through April of 20X8
Length of tax prepartion 3 months
Price of tax preparation to be allocated over the return preparation period $ 2,000 stand alone price
Price of consulting services to be allocated over consulting period $ 5,000 stand alone price
Customers are charged a lesser amount as follows for both tax and consulting $ 6,000
Anderson Accounting Services LLC's current year end 12/31/X7
Customers pay at the contract date for BOTH the consulting and tax preparation services.

What are the performance obligations in the contract?

A.

Tax preparation services
B.

Tax preparation services and tax consulting services
C.

Unable to determine

D.Tax consulting services

QUESTION 3

Determine the transaction price that should be allocated to the consulting services.

A.

$4,286
B.

$1,714
C.

$1,429
D.

$4,571

QUESTION 4

Calculate the total revenue that should be recognized in the current accounting period.

A.

$4,571
B.

$1,714
C.

$1,429

D. $4,286

QUESTION 5

What is the total amount in the deferred revenue account(s) at the end of the current accounting period?

A.

$1,714
B.

$4,571
C.

$4,286
D.

$1,429

QUESTION 6

What is the total amount of revenue that should be recognized in the NEXT accounting period period?

A.

$1,714
B.

$4,286
C.

$1,429
D.

$4,571

QUESTION 7

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Deferred Revenue XXX

A.

No impact
B.

Decrease
C.

Increase

QUESTION 8

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Accounts Receivable XXX

A.

No impact
B.

Increase
C.

Decrease

QUESTION 9

Revenue is defined as:

An inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.

Revenue is recognized from the settlement of which of the following liabilities:
A.

Discount on Bonds Payable
B.

Deferred Revenue
C.

Salaries Payable
D.

Accrued Interest

QUESTION 10

A customer must have "control" over the good or service in order for a performance obligation to be considered as having been satisfied for purposes of revenue recognition.
A.

TRUE
B.

FALSE

Sarasota Corp. has been authorized to issue 20,400 shares of $100 par value, 6%, noncumulative preferred stock and 1,140,000 shares of no-par common stock. The corporation assigned a $4 stated value to the common stock. At December 31, 2017, the ledger contained the following balances pertaining to stockholders’ equity. Preferred Stock $154,000 Paid-in Capital in Excess of Par Value—Preferred Stock 21,400 Common Stock 1,980,000 Paid-in Capital in Excess of Stated Value—Common Stock 1,550,000 Treasury Stock (4,400 common shares) 35,200 Retained Earnings 82,600 Accumulated Other Comprehensive Income 49,400 The preferred stock was issued for $175,400 cash. All common stock issued was for cash. In November 4,400 shares of common stock were purchased for the treasury at a per share cost of $8. No dividends were declared in 2017. Prepare the journal entries for the following. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) Issuance of preferred stock for cash. (2) Issuance of common stock for cash. (3) Purchase of common treasury stock for cash. No. Account Titles and Explanation Debit Credit 1. enter an account title to record the first transaction enter a debit amount enter a credit amount enter an account title to record the first transaction enter a debit amount enter a credit amount enter an account title to record the first transaction enter a debit amount enter a credit amount 2. enter an account title to record the second transaction enter a debit amount enter a credit amount enter an account title to record the second transaction enter a debit amount enter a credit amount enter an account title to record the second transaction enter a debit amount enter a credit amount 3. enter an account title to record the third transaction enter a debit amount enter a credit amount enter an account title to record the third transaction enter a debit amount enter a credit amount Prepare the stockholders’ equity section of the balance sheet at December 31, 2017.