Accounting Chapter 4 4 110 Lane Company Completing The Accounting Cycle

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Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

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110. Lane Company is completing the accounting cycle at the end of its annual accounting

period, December 31, 2011. No adjusting entries have been made during the year so three

adjusting entries must be made to update the accounts. The following accounts, selected from

the company’s chart of accounts, are to be used for this purpose. They are coded to the left for

easy reference.

You are to indicate the appropriate account code and amount for each of the required

adjusting entries at December 31, 2011.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

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111. Below are four transactions that were completed during 2011 by Timber Lodge. The

annual accounting period ends on December 31. Each transaction will require an adjusting

entry at December 31, 2011. You are to provide the 2011 adjusting entries required for

Timber Lodge.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

112. Four transactions are given below that were completed during 2011 by Russell

Company. You are to provide the adjusting entries required for Russell Company on

December 31, 2011. No adjusting entries were made during the year.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

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113. Three transactions are given below that were completed during 2011 by Story Company.

Prepare the adjusting entries as of December 31, 2011, assuming no adjusting entries have

been made during the year.

A. On June 1, 2011, Story Company paid $12,600 for one year’s rent beginning on that date.

The rent payment was recorded as follows:

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

B. On February 1, 2011, Story Company purchased office supplies during the year that cost

$700 and placed the supplies in a storeroom for use as needed. The purchase was recorded as

follows:

At December 31, 2011, a count showed unused office supplies of $200 in the storeroom.

There was no beginning inventory of supplies on hand.

C. On December 31, 2011, Story Company owed employees $2,000 for wages earned during

December. These wages had not been paid nor recorded.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

114. For each of the following accounts you are to enter one capital letter in each cell which

indicates for each account its normal characteristics.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

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115. A list of the accounts of Medford Corporation is given below, followed by some selected

transactions. Indicate the accounts that should be debited and credited for each transaction

closing entry by placing the appropriate account codes in the debit and credit columns

provided.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

116. On December 31, 2010, Madison Company prepared an income statement and a balance

sheet. In making the adjusting entries at year-end, Madison failed to record the adjusting entry

for wages earned by employees, but not yet paid, amounting to $5,000 for the last four days of

the year. The income statement reported net income of $52,000. The balance sheet reported

total assets of $254,000, total liabilities of $170,000 and stockholders’ equity of $84,000.

Complete the following tabulation to show the correct amounts for the financial statements

(ignore income taxes).

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117. Johnson Corporation is completing the accounting information processing cycle at the

end of the fiscal year, June 30, 2010. Johnson has provided the following trial balances as of

June 30, 2010:

Requirements:

A. Reconstruct the adjusting entries and give a brief explanation of each.

B. What is the amount of net income?

C. Calculate earnings per share (EPS) assuming 1,000 shares of common stock are

outstanding.

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

118. The comparative balance sheets of Titan Company for the years ended December 31,

2010 and 2011, reported the following selected amounts:

The 2011 income statement reported the following:

Requirements:

A. Calculate the total amount of office supplies purchased during 2011.

B. Calculate the total amount of rent collected during 2011.

C. In what section of the statement of cash flows would the payments for office supplies

appear?

D. In what section of the statement of cash flows would the collection for rents appear?

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

119. On January 1, 2011 the balance in the prepaid insurance account was $2,500. On

December 31, 2011, after the 2011 adjusting entries were made, the balance of the prepaid

insurance account was $1,200. During 2011, cash payments for insurance premiums

amounted to $5,000, which was debited to the prepaid insurance account. Prepare the

adjusting entry which must have been made at December 31, 2011.

120. On December 31, 2010, the manager of Jordan Creek Apartments noticed that four

tenants had not paid their December rent amounting to $500 each. What is the adjusting entry

required on December 31, 2010?

Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings

121. On July 1, 2011, Bass Company paid a two-year insurance premium. On that date the

following journal entry was made:

The annual accounting period ends on December 31, 2011.

A. How much of the premium should be reported as expense on the 2011 income statement?

B. What is the amount of prepaid insurance which should be reported on the balance sheet at

December 31, 2011?

C. Prepare the adjusting entry that should be made on December 31, 2011, assuming no

adjusting entries have been made during the year.