ACTG 2010 Chapter Notes - Chapter 3: Trial Balance, General Ledger, Accrual

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8 Apr 2014

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Account: a category of asset, liability, owners" equity, revenue, or expense. Accounting cycle: the process by which data about economic events are entered into an accounting system, processed, organized, and used to produce info such as financial statements. Accounting estimate: estimated amounts that must be made when preparing financial statements because the actual amounts pertaining to many economic events and transactions are not known with certainty at the time. Examples include the amount of accounts receivable that will not be collected, the useful lives of capital assets, and the cost of warranty services that have not yet been provided. Accrued expense: an expense that is recognized and recorded in the financial statements before the cash payment is made. Accrued liability: a liability that is recognized and recorded in the financial statements before the cash payment is made. Accrued revenue: revenue that is recorded before cash is received.

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Information for Entity A for the year ended December 31, 2018 ($ in millions):

Income from continuing operations before tax	$160
Temporary differences (all related to operating income):
Accrued warranty expense in excess of expense included in operating income	12
Depreciation deducted on tax return in excess of depreciation expense	32
Permanent differences (all related to operating income):
Nondeductible portion of entertainment expense	8
Interest received on municipal bonds	3
Balance in deferred tax asset account, January 1, 2018	1
Balance in deferred tax liability account, January 1, 2018	2
The applicable enacted tax rate for all periods is 40%.

Show work.

A. Prepare the appropriate journal entry to record income taxes.

B. What is Entity A's net income?

C. Sometimes a temporary difference will produce future deductible amounts. Explain what is meant by future deductible amounts. Describe at least one situation that has this effect, for example, one example is when rent revenue is collected in advance from tenants (deferred rent revenue for financial accounting purposes) but will be recognized as the tenants occupy the property. You can think of others. How are future deductible amounts recognized in the financial statements? As between deferred tax assets and deferred tax liabilities, which would management prefer and why?

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QUESTION 6

Which of the following statements is not true regarding prepaidexpenses?

		Prepaid expenses represent assets.
		Prepaid expenses are shown in a special section of the incomestatement.
		Prepaid expenses become expenses only as goods or services areused up.
		Prepaid expenses appear in the balance sheet.

4 points

QUESTION 7

The balance of an unearned revenue account:

		Appears in the balance sheet as a component of stockholders'equity.
		Appears in the income statement along with other revenueaccounts.
		Appears in a separate section of the income statement forrevenue not yet earned.
		Appears in the liability section of the balance sheet.

4 points

QUESTION 8

As of January 31, Hudson Corporation owes $600 to U-Rent-It forequipment used during January. If no adjustment is made for thisitem at January 31, how will Hudson's financial statements beaffected?

		Cash will be overstated at January 31.
		Net income for January will be overstated.
		Stockholders' equity will be understated.
		The financial statements will be accurate since the $600 doesnot have to be paid yet.

4 points

QUESTION 9

The accountant for the Linville Company forgot to make anadjusting entry to record revenue earned but not yet billed tocustomers. The effect of this error is:

		An overstatement of assets.
		An overstatement of stockholders' equity.
		Understatement of both assets and stockholders' equity
		Overstatement of both assets and stockholders' equity.

4 points

QUESTION 10

An adjusting entry involving recognition of unrecorded revenueis necessary at the end of March in which of the followingsituations?

		Financial Consultants received payment in February forconsulting services rendered in March.
		Financial Consultants began working for a client on March 15;bills will be sent monthly beginning April 15.
		Financial Consultants made payment in January for office rentfor the first three months of the year.
		On March 31, a major customer paid his bill for a consulting jobcompleted in February.

4 points

QUESTION 11

Which of the following entries causes an immediate decrease inassets and in stockholders' equity?

		The entry to record depreciation expense.
		The entry to record revenue earned but not yet received.
		The entry to record the earned portion of rent received inadvance.
		The entry to record accrued wages payable.

4 points

QUESTION 12

The CPA firm auditing Greer Company found that net income hadbeen overstated. Which of the following errors could be thecause?

		Failure to record depreciation expense for the period.
		No entry made to record purchase of land for cash on the lastday of the year.
		Failure to record payment of an account payable on the last dayof the year.
		Failure to make an adjusting entry to record revenue which hadbeen earned but not yet billed to customers.

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Please I need help with the Smithville project full versionChapter 9 and the complete instructions are below. Thank you

Chapter 9 Adjusting and Closing Entries for GovernmentalActivities, Government-wide Level; Preparation of Government-wideand Major Fund Financial Statements

Prior to preparing financial statements at the end of FY 2014,it is necessary to record depreciation expense for the year forgovernmental activities at the government-wide level.

Based on general capital assetsassigned to specific functions, depreciation expense related toequipment and infrastructure is allocated to functions as shownbelow:

Equipment Infrastructure

GeneralGovernment $ 42,348

PublicSafety 220,212

PublicWorks 84,696 $118,344

Health andWelfare 21,168

Culture andRecreation 55,056

Totals $423,480 $118,344

In addition, depreciation expense forbuildings in the amount of $188,000 is allocated to functionsaccording to the percentage of total floor space of buildings usedby each function. The Public Works director has provided thefollowing information for the current year:

Percentage of Building

Floor Space Used

GeneralGovernment 20%

PublicSafety 35

PublicWorks 22

Health andWelfare 10

Culture andRecreation 13

Total 100%

Required:[Para. 9-a] Record depreciation expense for theyear 2014 in the governmental activities general journal at thegovernment-wide level. Round all amounts to the nearest wholedollar. Verify accuracy of the adjusting entries and post to thegeneral ledger by clicking [Post Entries].

b. Although closing entries were made in each fund in Chapters 4through 7 of this cumulative problem, they have not yet beenrecorded at the government-wide level.

Required: ClosingEntries. Record the journal entries required on December31, 2014, to close all temporary accounts for governmentalactivities at the government-wide level. These entries should alsorecognize changes in the accounts Net PositionâNet Investment inCapital Assets, Net PositionâRestricted for Public Safety (seeGeneral Fund), Net PositionâRestricted for Capital Projects, andNet PositionâRestricted for Debt Service. (Note: Be sure todeduct accrued interest on long-term debt in calculating theDecember 31, 2014 balance of Net PositionâRestricted for DebtService.) For each account to be closed or reclassified,be sure and click on the check mark for [ClosingEntry] and that âClosing Entriesâ appears in the[Transaction Description] box. Post the closingentries to the general ledger by clicking on [PostEntries].

Please remember that beforeclosing the City of Smithville, you must click on [File],and [Save/Save As] to save your work. Your work is NOTautomatically saved.

Usethe exportable trial balances used in Chapters 2 through 7 of thisproblem and export the pre-closing trial balance and post-closingtrial balance for governmental activities to prepare allgovernment-wide and fund financial statements that the City ofSmithville must present for its basic financial statements to be inconformity with generally accepted accounting principles. (SeeIllustrations A2-1 through A2-11 of the Reck, Lowensohn, and Wilsontextbook for examples of these statements.) We recommend that youuse Excel to prepare these financial statements; however, yourinstructor may want you to do these manually. Since the Solid WasteDisposal Fund is the only fund in the proprietary funds category,you may reprint the statement of net assets; statement of revenues,expenses, and changes in net assets; and the statement of cashflows prepared for the Solid Waste Disposal Fund as the requiredstatements for the proprietary fund basic financial statements,with appropriate changes to the titles of the statements. Theinformation for the Solid Waste Disposal Fund can also be used tocomplete the Business-type Activities columns of thegovernment-wide financial statements.

(Notes: The City ofSmithville is a primary government and has no other organizationsfor which it is accountable as component units. Also, the FY 2015financial information for the Street Improvement Debt Service Fundis not included in any of the basic financial statements you arepreparing, as the statements you are preparing pertain only to FY2014.)

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ACTG 2010 Chapter Notes - Chapter 3: Trial Balance, General Ledger, Accrual

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