ACCT 1220 Midterm: Midterm 1 - Solution - Students
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Practice Problem 1 On October 1, 2016, Microsun lent $90,000 toanother company. A note was signed with principal and 8% interestto be paid on September 30, 2017. On November 1, 2016, the company paid its landlord $6,000representing rent for the months of November through January.Prepaid rent was debited. On August 1, 2016, collected $12,000 in advance rent fromanother company that is renting a portion of Microsun's factory.The $12,000 represents one year's rent and the entire amount wascredited to rent revenue. Depreciation on office equipment is $4,500 for the year. Vacation pay for the year that had been earned by employees butnot paid to them or recorded is $8,000. The company recordsvacation pay as salaries expense. Microsun began the year with $2,000 in its asset account,supplies. During the year, $6,500 in supplies were purchased anddebited to supplies. At year-end, supplies costing $3,250 remain onhand. | |
Required: Prepare the necessary adjusting entries at December 31, 2016,for the Microsun Company for each of the following situations.Assume that no financial statements were prepared during the yearand no adjusting entries had been recorded. If Microsun's accountant employed reversing entries foraccruals, which adjusting entries would she likely reverse at thebeginning of the following year? Prepare the appropriate reversing entries at the beginning of2017. Suppose for item #6 that Microsun began the year with $2,000 inits Supplies Expense account. During the year, $6,500 in supplieswere purchased and debited to Supplies Expense. At year-end,supplies costing $3,250 remain on hand. Prepare the adjustingjournal entry. Given the situation described in Requirement 4 above, preparethe reversing journal entry, if one is deemed necessary. |
Use the following information to answer questions1-5.
The Aggie Graphics Company was organized on January 1, 2017.
The trial balance before adjustment at December 31, 2017contained the following account balances:
Cash | $9,500 | |
Accounts Receivable | 4,000 | |
Prepaid Insurance | 1,800 | |
Equipment | 45,000 | |
Accumulated Depreciation | 4,500 | |
Accounts Payable | 3,500 | |
Notes Payable | 18,000 | |
Common Stock | 5,000 | |
Retained Earnings | 12,000 | |
Dividend | 2,000 | |
Graphic Fees Earned | 52,100 | |
Consulting Fees Earned | 5,000 | |
Salaries Expense | 30,000 | |
Supplies Expense | 2,700 | |
Advertising Expense | 1,900 | |
Rent Expense | 1,500 | |
Utilities Expense | 1,700 | |
$100,100 | $100,100 |
Analysis reveals the following additional data: (Assume thebooks are only closed at year end)
(A) The $2,700 balance in Supplies Expenserepresents supplies purchased in January. At December31, there was $1,200 of supplies on hand.
(B) The note payable was issued on September1. It is a 3% 6-month note.
(C) The balance in Prepaid Insurance is thepremium paid on a one-year policy, dated March 1, 2017.
(D) Consulting Fees are credited to revenuewhen received. At December 31, consulting fees of $1,000 contractedfor January, 2017 have yet to be performed.
(E) The equipment was purchased on January 1,2017. It has a 10-year useful life and no salvage value.
The entry to record (A) above would include a debit to:(Assume the company is only making one adjusting entry to recordthis information)
A. | Supplies for $1,500 | |
B. | Supplies for $1,200 | |
C. | Supply Expense for $1,200 | |
D. | Prepaid Supply Expense for $2,700 |
1 points
QUESTION 2
What is the balance in the interest payable accountafter adjustment?
A. | $ 45 | |
B. | $180 | |
C. | $90 | |
D. | $270 |
1 points
QUESTION 3
The correct entry to record (E) above is:
A. | DepreciationExpense 4,500 AccumulatedDepreciation 4,500 | |
B. | DepreciationExpense 9,000 AccumulatedDepreciation 9,000 | |
C. | DepreciationExpense 9,000 Equipment 9,000 | |
D. | DepreciationExpense 9,000 AccumulatedDepreciation 4,500 Equipment 4,500 | |