ACC1100 Lecture Notes - Lecture 5: Accounts Receivable, Income Statement, Accrual

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turquoiserat551

16 Sep 2018

School

Monash University

Department

Business - Accounting

Course

ACC1100

Professor

Alan Serry

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Document Summary

Adjustments made at the end of a period, in which expenses and revenues for the speci c period are recognised (based on accrual accounting) Expense incurred but not paid: dr accrued interest, cr interest revenue, dr wages expense, cr accrued wages/wages payable. Original recording methods: dr cash / cr prepaid revenue (l) Amount = money actually earned: dr prepaid expense (a) / cr cash. Amount = what has been used: dr prepaid revenue, dr expense, cr revenue, cr prepaid expense, dr cash / cr revenue (i) Amount = money still owed: dr expense (e) / cr cash. Amount = what can still be used: dr revenue, dr prepaid expense, cr prepaid revenue, cr expense. The systematic allocation of the depreciable amount of an asset over its useful life. Recorded as an expense via an adjusting entry. Recognised in the income statement as depreciation expense.

Related Questions

Account Tracking form provided:

Account Title -> copy the name of the accounts from the listbelow

Account Major Classification -> Asset (A), Liability (L),Ownerâs Equity (OE), Revenue (R) or Expense (E) or Not Applicable(NA)

Contra account -> place a check mark in this column if theitem is a contra account

Account Sub Classification -> only to be used with Asset andLiability accounts; Current Asset (CA); Property, Plant &Equipment (PPE); Current Liability (CL), Long-term Liability (LTL)or Not Applicable (NA)

Normal Balance -> debit (DR), credit (CR) or Not Applicable(NA)

Financial Statement-> Income Statement (IS), Statement ofOwnerâs Equity (SOE), Balance Sheet (BS) or Not Applicable (NA)

Temporary or Permanent -> T for temporary (nominal) accountsand P for permanent (real) accounts

Accounts Payable

Accounts Receivable

Accumulated Depreciation

Advertising Expense

Buildings

Cash

Depreciation Expense

Fees Earned

Income Summary

Insurance Expense

Interest Payable (due in 1 month)

Interest Receivable (due in 2 months)

Joey Bee, Capital

Joey Bee, Drawing

Land

Notes Payable (due in 3 years)

Notes Receivable (due in 2 months)

Office Equipment

Prepaid Insurance

Prepaid Rent

Rent Expense

Notes Payable (due in 2 months)

Store Equipment

Supplies

Supplies Expense

Taxes Payable (due in 4 months)

Unearned Fees

Unearned Rent

Unearned Revenue

Wages Payable

goldkangaroo10

Tierney County

Total Governmental Funds

Preclosing Trial Balance

December 31,2005

Cash 1,348,200 (dr)

Investments 7,355,600 (dr)

Due from general fund 3,500 (dr)

Taxes Receivable 189,000 (dr)

Allowance for uncollectable taxes 38,500 (cr)

Interest and penalities receivable 5.250 (dr)

Allowance for uncollectable interest and penalities 476 (cr)

accounts receivable 45,500 (dr)

Allowance for uncollectable accounts 1,750 (cr)

Accrued interest receivable 191,800 (dr)

Inventory of materials and supplies 16,450 (dr)

vouchers payable 1,016,400 (cr)

accrued salaries and wages payable 17,500 (cr)

contracts payable retained percentage 350,000 (cr)

interest payable (on current debt) 1,050 (cr)

unearned operating grant revenues 360,500 (cr)

unearned capital grant revenues 525,000 (cr)

Due to enterprise fund 11,550 (cr)

due to special revenue funds 3,500 (cr)

deferred tax revenues 107,800 (cr)

fund balance (preclosing) 695,049 (cr)

Revenues:

Taxes 3,395,000 (cr)

licenses and permits 311,500 (cr)

Fines and Forfeitures 133,000 (cr)

Unrestricrted grants 367,500 (cr)

Operating Grants 420,000 (cr)

Capital Grants 7,231,000 (cr)

Investment Income 600,000 (cr)

Other Revenues 7,000 (cr)

Current operation expenditures / expenses

General government 274,400 (dr)

public safety 1,417,500 (dr)

streets and roads 861,700 (dr)

health and sanitation 162,400 (dr)

Parks and recreation 65,100 (dr)

Captial outlay expenditures:

for construction 8,890,000 (dr)

for equipment 203,700 (dr)

Debt Service Expenditures:

bond principal retirement 700,000 (dr)

interest and bonds 356,745 (dr)

fiscal agent fees 52,500 (dr)

bond issue costs 35,000 (dr)

Other Financing Sources:

bonds 6,300,000 (cr)

bond premium 42,000 (cr)

Proceeds from sale fo general capital assets 175,000 (cr)

Transfers form general fund 616,000 (cr)

Transfers from Special revenue funds 70,000 (cr)

Transfers from enterprise funds 63,000 (cr)

Other Financing uses:

Transfers to capital projects funds 56,000 (dr)

trasfers to debt service funds 560,000 (dr)

transfers to general fund 70,000 (dr)

Totals 22,860,075 both

1. the beginning trial balance of the general capital assets andgeneral long term liabilities accounts at January 1, 2015 was

land 465,500 (dr)

buildings 4,375,000 (dr)

accumulated depreciation _ buildings 2,730,000 (cr)

machinery and equipment 1,400,000 (dr)

accumulated depreciation machinery and equipment 525,000(cr)

streets and roads 7,000,000 (dr)

accumulated depreciation streets and roads 4,200,000 (dcr

bonds payable 2,800,000(cr)

premium on bonds payable 70,000(cr)

liability for claims andjudgements - long term 490,000 (cr)

compensated absences liability -long term 350,000 (cr)

net position 2,075,500(cr)

totals 13,240,500

2. the balance of the long-termclaims and judgments obligation at december 31, 2015 was 450,000.all claims and judgements of the county are related to health andsanitation.

3. the balance fo the long-termliability for compensated absences at december 31, 2015 was425,000, compensated absence liabilities are generated equally bythe general government, public safety, streets and roads, andhealth and sanitation.

4. the bons issuance occurred atyear end. the equipment purchases occurred at the beginning of theyear.

5. the january 1, 2015 balance ofaccrued salaries and wages payable was 25,000

6. the january 1, 2015 balance ofdeferred tax revenue was 84,000

7. the operating grants revenueswere associated with public safety (100,000) and health andsanitaiton. the capital grants were associated with streets androads.

8. the accrued interst associatedwith bonds at december 31,2015 was 99,000 the january 1 2015balance was 87,500

9. the remaining term of thebonds payable with the premium (70,000) is 10 years. use straightline amortization.

10. the county depereciatesmachinery and equipment over 5 years, building over 20 years, andstreets and roads over 30 years. assume zero salvagevaleus.

11. depreciation expense on thebuildings and on the machinery and equipment is associated withfunctions as follows: general government 10 %, pulbic safety 50%,streets and roads 25%, health and sanitaiton 10%, and parks andrecreation 5%.

12. the cpaital asset sold wasequipment, which cost 500,000 and had accumulated depreciation atthe january 1 sale date of 400,000

13. the county's only internalservice fund provides 75% of its services to enterprise funds andsets its billings equal to its costs of providing services. Theinternal service fund billings to general governmental departmentsduring the year totaled 100,000. billings of 25,000 were associatedwith each functional category of expenditures except parks andrecreation.

Reguired: the december 31, 2015total fund balance (postclosing) was 6,721,274. Prepare a balancesheet conversion worksheet to derive government-wide, governmentalactivities data for Tierney County.

cerisealligator433

I have done all the adjusting entries and was wondering ifsomeone could take a look at them. I would really appreciate it ifyou could give me some feedback if any are wrong and how to fixthem. Two that I am real unsure about are "b." and "q." but againif you could look at them all I would be very grateful. ThankYou

DeeDee DoubleEntry, Incorporated
End of Period Worksheet
For the Year Ended December31, 2017
	Unadjusted				Adjusted
Account Title	Trial Balance		Adjustments		Trial Balance
	DR	CR	DR	CR	DR	CR
Cash	240,300	-		27,000	213,300
Restricted Cash			27,000		27,000
Accounts Receivable	925,000	-			925,000
Allowance for Doubtful Accounts	-	49,000	67,000		18,000
Interest Receivable	-		688		688
Merchandise Inventory	187,500	-	3,700		191,200
Prepaid Insurance	9,000	-		5,211	3,789
Prepaid Advertising	-	-	12,000		12,000
Prepaid Rent	-	-	7,500		7,500
Office Supplies	7,800	-		2,941	4,859
Note Receivable	75,000	-			75,000
Available for Sale Securities	380,000	-			380,000
Office Building	4,250,000	-			4,250,000
Accumulated Depreciation - OfficeBuilding	-	221,500		38,750		260,250
Storage Building	1,650,000	-			1,650,000
Accumulated Depreciation - StorageBuilding	-	-		46,667		46,667
Land	450,000	-			450,000
Leasehold Improvements	190,000	-	5,459		195,459
Accumulated Depreciation - LeaseholdImprovements	-	-		728		728
Office Equipment	125,000	-			125,000
Accumulated Depreciation - OfficeEquipment	-	42,000		16,600		58,600
Patent	250,000	-			250,000
Accumulated Amortization				31,250		31,250
Accounts Payable	-	145,000				145,000
Sales Tax Payable	-	-		19,821		19,821
Salaries Payable	-	-		39,249		39,249
Payroll Taxes Payable	-	-		3,251		3,251
Interest Payable	-	-		127,750		127,750
Income Tax Payable	-	-		245,756		245,756
Unearned Rent Revenue	-	96,000	25,263			70,737
Loan Payable - Onstar Bank	-	500,000				500,000
Loan Payable - Coldstar Bank	-	2,250,000				2,250,000
Common Stock	-	425,000				425,000
Additional Paid in Capital	-	2,800,000				2,800,000
Retained Earnings	-	1,379,420				1,379,420
Accumulated Other ComprehensiveIncome	-	8,500				8,500
Dividends	280,000	-			280,000
Sales	-	4,380,250	19,821			4,360,429
Sales Returns and Allowances	19,500	-			19,500
Sales Discounts	14,600	-			14,600
Cost of Goods Sold	1,817,900	-		3,700	1,814,200
Amortization Expense			31,250		31,250
Sales Salaries Expense	676,400	-	25,500		701,900
Office Salaries Expense	434,000	-	17,000		451,000
Advertising Expense	54,000	-		12,000	42,000
Depreciation Expense - OfficeBuilding	-	-	38,750		38,750
Depreciation Expense - StorageBuilding			46,667		46,667
Depreciation Expense - LeaseholdImprovements	-	-	728		728
Depreciation Expense - OfficeEquipment	-	-	16,600		16,600
Leasing Expense - Stores	132,000	-			132,000
Miscellaneous Selling Expense	16,950	-		5,459	11,491
Rent Expense - Storage Facility	18,000	-		7,500	10,500
Insurance Expense	2,000	-	5,211		7,211
Office Supplies Expense	28,500	-	2,941		31,441
Warranty Expense	5,000		5,709		10,709
Miscellaneous Administrative Expense	9,220	-			9,220
Rent Revenue	-	-		25,263		25,263
Interest Revenue on Note Receivable	-	-		688		688
Dividend Revenue on AFS Securities	-	18,000				18,000
Warranty Liability				5,709		5,709
Income Tax Expense			245,756		245,756
Interest Expense			127,750		127,750
Bad Debt Expense	67,000	-		67,000
	12,314,670	12,314,670	732,292	732,292	12,822,067	12,822,067

DeeDee DoubleEntry, Incorporated
Adjusting Journal Entries
For the Year Ended December31, 2017
Item	Account Title	Dr.	Cr.
a.	Restricted Cash	27,000
	Cash		27,000

b.	Allowance for Doubtful Accounts	67,000
	Bad Debt Expense		67,000

c.	Office Supplies Expense	2941
	Office Supplies		2941

d.	Prepaid Rent	7500
	Rent Expense - Storage Facility		7500

e.	Interest Receivable	688
	Interest Revenue on Note Receivable		688

f.	Insurance Expense	5211
	Prepaid Insurance		5211

g.	Depreciation Expense - Office Building	38750
	Accumulated Depreciation - Office Building		38750

h.	Office Salaries Expense	17000
	Sales Salaries Expense	25500
	Salaries Payable		39249
	Payroll Taxes Payable		3251

i.	Prepaid Advertising	12000
	Advertising Expense		12000

j.	Unearned Rent Revenue	25263
	Rent Revenue		25263

k.	Accumulated Other Comprehensive Income	89000
	Available for Sale Securities		89000

l.	Depreciation Expense - Office Equipment	16600
	Accumulated Depreciation - Office Equipment		16600

m.	Sales	19821
	Sales Tax Payable		19821

n.	Amortization Expense	31250
	Accumulated Amortization		31250

o.	Depreciation Expense - Storage Building	46667
	Accumulated Depreciation - Storage Building		46667

p.	Leasehold Improvements	5459
	Miscellaneous Selling Expense		5459

	Depreciation Expense - Leasehold Improvements	728
	Accumulated Depreciation - Leasehold Improvements		728

q.	Interest Expense	17500
	Interest Payable		17500

	Interest Expense	110250
	Interest Payable		110250

r.	Warranty Expense	5709
	Warranty Liability		5709

s.	Merchandise Inventory	3700
	Cost of Goods Sold		3700

t.	Income Tax Expense	245,756.00
	Income Tax Payable		245,756.00

DeeDee does banking at three different financial institutions.The details are as DeeDee Double Entry

Bank	Account #	Balance
Coterica	123456	175,000
Coterica	123457	(10,000)
4th BAnk	345689	82,000
Bank Two	397567	(6,700)

a. You also note the Board of Directors has restricted $27,000of cash for future expansion. This $27,000 is part of the cashbalance. The future expansion will not occur for several moreyears.

b. Based on your inquiries, you note that $67,000 of accountsreceivable had been written off during the year. The clerk haddebited bad debt expense for $67,000 and credited AccountsReceivable for $67,000. When $15,000 of accounts previously writtenoff had been collected, the accountant debited cash and creditedsales. The company uses the allowance method based on the aging ofaccounts receivable. Based on this method, DeeDee determines thatuncollectible accounts are $89,000 at the end of 2017. (Replace theX with the last digit of your student number).

c. Per a physical count of office supplies, $4,859 (enter thelast two digits of your student number) of supplies remained at theend of 2017. The balance on the worksheet in the office suppliesaccount represents last years ending balance. During the year,$28,500 of office supplies were purchased and immediatelyexpensed.

d. Because of strong demand and a need for additional inventory,DeeDee needed some temporary additional storage space so on June 1,2017 they rented a unit for an annual rate of $18,000 and they paidthe entire amount up front.

e. On November 1st, 2017, (Enter your birthday month) DeeDeeloaned a key supplier, $75,000. A promissory note was signed andissued. The agreed upon interest rate was 5.5% and the key supplierhas agreed to pay interest and $15,000 of the principle eachJanuary 1^st. The note was recorded in Notes Receivableand is the only note outstanding.

f. On February 1, 2017, DeeDee renewed a 19 month insurancepolicy for $9,000. All cash was paid at the time the policy wassigned and prepaid insurance was increased. (Replace the X with thelast digit of your student number.) All other transactionsinvolving insurance were properly recorded.

g. The office building was bought in January 1, 2015 by DeeDeeand DeeDee originally planned to use the building for 40 years andestimated no salvage value. DeeDee depreciates the building on a straightline basis. Now in 2017, DeeDee estimates the total life to remain at 40 years,but believes the salvage will be $900,000. (Replace theX with the last digit of your student number.)

h. DeeDee is open seven days a week and has a daily payroll of$8500. Employees are paid every Friday, December 31 is a Wednesday.40% of the payroll is for office employees, 60% of payroll is forsales employees. The employer portion of FICA expense is 7.65% andno employee has reached the maximum. DeeDee records payroll taxexpenses in salary expense.

i. On December 1, 2017 DeeDee paid ABC Advertising $16,000 for afour month campaign of advertising services. Equal services areprovided each month. All other advertising paid forduring the year has been consumed.

j. On August 1, 2017, DeeDee rented a portion of one store toMarketing Majors Inc. The contract was for 19 (enter the last digitof your student number) months and DeeDee required all of the cashup front. The rent is being earned equally each month. This is theonly item in which rent is being earned by the company.

k. As of 12/31/2017 the Available for Sale Securities have afair value of $291,000 (enter the last digit of your student numberin place of the X). Due to the market conditions, the company doesnot plan on selling the assets in 2017, but their intent is to sellat some point in time. You can ignore the tax effect onunrealized gains and losses. (Hint: Unrealized Gains andLosses are closed to Accumulated Other Comprehensive Income at theend of the year.)

l. DeeDee uses the DDB method to depreciate office equipment. Nooffice equipment was added during 2017. It is estimated that theoffice equipment has a useful life of 10 years with a salvage valueof $2,000. Prior depreciation was correctly calculated based onperiod of time held.

m. After reviewing details of sales, you note that the salestaxes collected on the last week of Decemberâs sales were includedin sales revenue. Sales recorded the last week of December thatincluded the sales tax of 12% (enter your birthday month plus 1)amounted to $185,000.

n. On November 1, 2017 (enter your birthday month), DeeDeerecorded a patent in the amount of $250,000. The company paidoutside legal fees of $120,000 to have the patent registered. Theother $130,000 represents internal costs in developing the patent.The patent is good for 20 years, but the company estimates that thepatent will have a useful life of 8 years with no residual value.No one knows what to do with this information so no amortizationhas been recorded for 2017. Amortization is straight line and thecompany depreciates using partial years for intangible assets.

o. The storage building was self-constructed this year byDeeDee. The Company had their initial expenditure of $700,000 onJanuary 1. They paid an additional $500,000 on March 1^st, $300,000 on June 1^st, and then the final payment of$150,000 on August 1^st. when the building was completedand occupancy occurred. Payments to contractor were properlycapitalized. The company has decided to use S/L method fordepreciation. The storage building is estimated to have a life of30 years and a savage value of $250,000. The companywill take a full year of depreciation in year of acquisition.

p. You note that Leasehold Improvements have not beendepreciated for this year. DeeDee started to lease some new retailspace in 2017 and added shelving and fixtures to this leased space.Based on your review of invoices, the previous accountantcapitalized the cost of fixtures but did not capitalize theshipping and installation costs of $5,459 ((enter the last threedigits of your student number in place of the XXX). . These costswere expensed and recorded as a miscellaneous administrativeexpense. DeeDee has decided to use double declining balance (DDB)depreciation for this item and to take a full year of depreciationin the year of acquisition. The leasehold improvements have auseful life of 15 years with a salvage value of$10,000.

q. DeeDee Double Entry has two loans outstanding as of12/31/2017. Interest is paid annually on January 1st. The facts on each loan are asfollows: Onstar Bank Loan â outstanding since January 1, 2017 with a 3.5%interest rate. This loan was taken out to finance the constructionof the Storage Building. Interest for the year and 15% of theprinciple will be paid to the bank on January 1, 2018. Except forrecording the initial cash received and loan, no additional entries have beenmade. Coldstar Bank Loan â also outstanding all of 2017 with a 4.9% interest rate (enter the last digit of your student number).Interest is due on January 1, 2018. Principle is due on January 1,2023. Since interest will not be paid to the Bank until 2018,DeeDeeâs office staff did not accrue any interest.

r. DeeDee added a one-year warranty to one of its computer gamesthis year. It is estimated that the total cost of servicing thewarranties on the 2017 sales will be $10,459 (enter the last threedigits of your student number). During 2017, $4,750 wasrefunded to customers for warranty issues on 2017 sales andrecorded as warranty expense.

s. DeeDee uses the FIFO Inventory Method in valuing inventory.The inventory balance of $187,500 was based on a physical count at12/31/2017. Based on your analysis, you have noted that $12,500 ofmarketing games that belonged to Marketing Majors Inc. was includedin the account. You also note that goods were in transit from avendor on December 31, 2017. The cost of the inventory was $16,200and the goods were shipped f.o.b. shipping point on December 29,2017.

t. DeeDee has a straight tax rate of 28%. Income tax expense isNet Income before taxes times 28%. (Hint: Prepare the IncomeStatement up to Net Income before Taxes and then record thisadjusting journal entry.

ACC1100 Lecture Notes - Lecture 5: Accounts Receivable, Income Statement, Accrual

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