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22 Dec 2018

1. Purchased a parcel of land on March 1, 2013 for $650,000 bypaying $425,000 in cash and

signing a short-term note payable with the seller for $225,000.You must repay the $225,000 in

exactly one year on March 1, 2014. You agree to pay the seller4.5 percent interest (annual

rate) on a quarterly basis (June 1, September 1, December 1,2013, and March 1, 2014).

[Adjusting Entry Required]


2. Leased additional warehouse space from Leasing Solutions fortwo years on June 1st. $92,000

cash was paid on this date which covers the full rental fee forthe two years.

[Adjusting Entry Required]


3. Purchased a truck for $140,000 cash on the 1st of January.The truck will be depreciated over

an 8 year period. You decide to use the 200% declining-balancedepreciation method because it

is determined that the truck will be more productive when it isnewer. The truck has an

estimated salvage value of $8,000

[Adjusting Entry Required]


4. At the end of the year, $42,000 cash was paid to the localbank for the long-term note payable
taken out on January 1, 2013. $38,000 of this was applied tothe loan principal. The remaining
amount was the accumulated interest due for 2013.

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Jarrod Robel
Jarrod RobelLv2
23 Dec 2018

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Cactus Company’s annual accounting year ends on June 30. Assumeit is June 30, and all of the entries except the followingadjusting journal entries have been made:

a.

The company earned service revenue of $1,900 on a special jobthat was completed June 29. Collection will be made during July; noentry has been recorded.
b.

On March 31, Cactus paid a six-month premium for propertyinsurance in the amount of $3,180 for coverage starting on thatdate. Cash was credited and Prepaid Insurance was debited for thisamount.
c.

At June 30, wages of $890 were earned by employees but not yetpaid. The employees will be paid on the next payroll date, which isJuly 15.
d.

On June 1, Cactus collected two months’ revenue of $440. At thatdate, Cactus debited Cash and credited Unearned Revenue for $440.One-half of it has now been earned but not yet recorded.
e. Depreciation of $1,490 must berecognized on a service truck purchased on July 1 of the previousyear.
f.

Cash of $4,140 was collected on May 1 for services to berendered evenly over the next year beginning on May 1. UnearnedRevenue was credited when the cash was received. Some of it has nowbeen earned but not yet recorded.
g.

The company owes interest of $590 on a bank loan taken out onFebruary 1. The interest will be paid when the loan is repaid nextyear on January 31.
h.

The income after all adjustments except income taxes was$31,000. The company’s federal income tax rate is 25%. Compute andrecord income tax expense.

Required:
1.

Determine the accounting equation effects of each requiredadjustment.

2.

Give the adjusting journal entry required for each transactionat June 30. (If no entry is required for atransaction/event, select "No Journal Entry Required" in the firstaccount field.)

1. Make all adjustments on the "Adjusting Journal Entries". Remember to include a description under each journal entry.

12 . On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824,
which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization.
Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used.
Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the
investment account.
13. ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used,
prepare the entry to record bad debt expense.
14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make
annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000
unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method
of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet
been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal
entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for
this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.)
15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension
plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014.
Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry.
Pension asset/liability (January 1) $0
Actual return on plan assets $40,000
Expected return on plan assets $20,000
Contributions (funding) in 2014 $37,000
Fair value of plan assets (December 31) $75,000
Settlement rate 10%
Projected benefit obligation (January 1) $0
Service cost $60,000
Benefits paid in 2014 $0
*For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature.
16 On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of
$10 per share on December 31, 2014. Additional information is as follows:
a. The service period related to the restricted stock is 2 years.
b. Vesting occurs if the CFO stays with the company for a two-year period.
c. The par value of the common stock is $3 per share.
Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation.
Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense)
17 Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15.
However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full
on the return's March 15, 2015 due date.
ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600,
so January through November income tax expense recognized amounts to $63,800 (11/12 months).
Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents
tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities.
Based on the income before income taxes figure from the income statement, record December's income tax expense
so that the entire year's total tax expense is correct.

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