ACC290 Week 4 Apply Exercise SCORE 100 PERCENT

Question 1

1. On June 1, 2019, Cain Company, a new firm, paid $5,100 rent in advance for a six-month period. The $5,100 was debited to the Prepaid Rent account.
2. On June 1, 2019, the firm bought supplies for $7,200. The $7,200 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing $2,925 were on hand.
3. On June 1, 2019, the firm bought equipment costing $54,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.

Prepare end-of-June adjusting entries for Cain Company.

Question 2

1. A firm purchased a two-year insurance policy for $6,720 on July 1, 2019. The $6,720 was debited to the Prepaid Insurance account.
2. On December 1, 2019, a firm signed a contract with a local radio station for advertising that will extend over a one-year period. The firm paid $15,360 in advance and debited the amount to Prepaid Advertising.

Prepare end-of-month adjusting entries for each of the above situations.

 

Question 3

On January 31, 2019, the general ledger of Palmer Company showed the following account balances.
 

ACCOUNTS
Cash	61,500
Accounts Receivable	21,000
Supplies	7,500
Prepaid Insurance	6,700
Equipment	90,000
Accum. Depr.—Equip.	0
Accounts Payable	15,200
Sadie Palmer, Capital	80,450
Fees Income	109,500
Depreciation Exp.—Equip.	0
Insurance Expense	0
Rent Expense	9,100
Salaries Expense	9,350
Supplies Expense	0

Additional information:
 

1. Supplies used during January totaled $4,950.
2. Expired insurance totaled $1,675.
3. Depreciation expense for the month was $1,450.

Complete the worksheet through the Adjusted Trial Balance section. Assume that every account has the normal debit or credit balance. The worksheet covers the month of January.

 

Question 4

Assume that a firm reports net income of $89,000 prior to making adjusting entries for the following items: expired rent, $6,900; depreciation expense, $8,100; and supplies used, $3,500.

Assume that the required adjusting entries have not been made. What effect do these errors have on the reported net income?

 

Question 5

Desoto Company must make three adjusting entries on December 31, 2019.
 

1. Supplies used, $10,200 (supplies totaling $16,400 were purchased on December 1, 2019, and debited to the Supplies account).
2. Expired insurance, $7,400; on December 1, 2019, the firm paid $44,400 for six months' insurance coverage in advance and debited Prepaid Insurance for this amount.
3. Depreciation expense for equipment, $5,000.

Required:
Prepare the journal entries for these adjustments and post the entries to the general ledger accounts

 

Question 6

A total of $3,600 in supplies was purchased during the year. At the end of the year $860 of the supplies were left. The adjusting entry needed at the end of the year is:

 

Multiple Choice

    debit Supplies Expense $3,600; credit Supplies $3,600

    debit Supplies Expense $2,740; credit Supplies $2,740

    debit Supplies Expense $860; credit Supplies $860

    debit Supplies $2,740; credit Supplies Expense $2,740

 

Question 7

MacGyver Company bought equipment on January 3, 2019, for $34,800. At the time of purchase, the equipment was estimated to have a useful life of 4 years and a salvage value of $960. Using the straight-line method, the amount of one year's depreciation is

 

Multiple Choice

    $960

    $5,800

    $470

    $8,460

 

Question 8

Equipment costing $22,000 with an estimated salvage value of $1,600 and an estimated life of 5 years was purchased on October 31, 2019. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2019?

 

Multiple Choice

    $340

    $5,100

    $680

    $1,600

 

Question 9

On September 1, 2019, Jay Walker Company purchased a one-year insurance policy for $1,560. The correct adjusting entry on December 31, 2019, is:

Multiple Choice

    debit Insurance Expense $520; credit Prepaid Insurance $520

    debit Insurance Expense $1,170; credit Prepaid Insurance $1,170

    debit Prepaid Insurance $130; credit Insurance Expense $130

    debit Prepaid Insurance $1,560; credit Insurance Expense $1,560

 

Question 10

On October 25, 2019, the company paid $26,400 rent in advance for the six-month period (November 2019 through April 2020). On December 31, 2019, the adjustment for expired rent would include:

Multiple Choice

    an $8,800 debit to Rent Expense.

    a $4,400 credit to Cash.

    a $26,400 credit to Rent Expense.

    a $4,400 credit to Prepaid Rent.