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MGAB01H3 Lecture Notes - Lecture 4: Deferred Income, Accrual, Deferral

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coffeemacaw523
6 Apr 2019
School
UTSC
Department
Financial Accounting
Course
MGAB01H3
Professor
Lisa

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MGAB01H3 Full Course Notes
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MGAB01H3 Full Course Notes
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Document Summary

P4 2 recording adjusting entries and determining their financial statement effects (ap4 2) lo4-1, 4-2. Chandra company"s fiscal year ends on june 30. It is june 30, 2018, and all of the 2018 entries have been made, except the following adjusting entries: on march 30, 2018, chandra paid ,200 for a six-month premium for property insurance starting on that date. Cash was credited and prepaid insurance was debited for this amount: at june 30, 2018, wages of were earned by employees but not yet paid. The employees will be paid on the next pay date, july 15, 2018: on june 1, 2018, chandra collected maintenance fees of for two months. At that date, chandra debited cash and credited deferred maintenance revenue for : depreciation must be recognized on a service truck that cost ,000 on july 1, 2017.

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Related Questions

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.)

The following transactions occurred during December 31, 2018,for the Falwell Company. 1. A three-year fire insurance policy waspurchased on July 1, 2018, for $14,760. The company debitedinsurance expense for the entire amount. 2. Depreciation onequipment totaled $14,000 for the year. 3. Employee salaries of$20,500 for the month of December will be paid in early January2019. 4. On November 1, 2018, the company borrowed $270,000 from abank. The note requires principal and interest at 12% to be paid onApril 30, 2019. 5. On December 1, 2018, the company received $4,700in cash from another company that is renting office space inFalwell’s building. The payment, representing rent for December andJanuary, was credited to deferred rent revenue. Prepare thenecessary adjusting entries for each of the above situations.Assume that no financial statements were prepared during the yearand no adjusting entries were recorded.

Sage Company was incorporated on January 2, 2018, but was unable to begin manufacturing activities until July 1, 2018, because new factory facilities were not completed until that date. The Land and Buildings account reported the following items during 2018. January 31 Land and building $170,300 February 28 Cost of removal of building 9,885 May 1 Partial payment of new construction 63,960 May 1 Legal fees paid 4,350 June 1 Second payment on new construction 42,600 June 1 Insurance premium 2,280 June 1 Special tax assessment 3,670 June 30 General expenses 38,411 July 1 Final payment on new construction 27,990 December 31 Asset write-up 50,411 413,857 December 31 Depreciation-2018 at 1% (3,653 ) December 31, 2018 Account balance $410,204 The following additional information is to be considered. 1. To acquire land and building, the company paid $90,300 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $117 per share. 2. Cost of removal of old buildings amounted to $9,885, and the demolition company retained all materials of the building. 3. Legal fees covered the following. Cost of organization $660 Examination of title covering purchase of land 1,610 Legal work in connection with construction contract 2,080 $4,350 4. Insurance premium covered the building for a 2-year term beginning May 1, 2018. 5. The special tax assessment covered street improvements that are permanent in nature. 6. General expenses covered the following for the period from January 2, 2018, to June 30, 2018. President’s salary $34,543 Plant superintendent’s salary-supervision of new building 3,868 $38,411 7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $50,411, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount. 8. Estimated life of building-50 years. Depreciation for 2018-1% of asset value (1% of $365,300, or $3,653). Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018. (Round answers to 0 decimal places, e.g. 5,275. Complete the journal entries.