Posted: September 16th, 2017
Accounting Principles I – Chapters 3 & 4 – Exam – Part II
Accounting Principles I – Online Chapters 3 & 4 – Exam – Part II
Complete the following activity and save this file on your hard drive. Then submit your file to your instructor on Canvas.
PART A (24 Points) In the journal for McGill Company provided below, record the appropriate adjusting entries as of December 31. Please note that McGill Company has not prepared any adjusting entries for the current year prior to December 31.
a. The Store Supplies account showed a beginning balance of $700 and purchases of $500. Unused store supplies at the end of the year were counted and totaled $300.
b. On December 1, the company paid three months rent in advance, debiting Prepaid Rent for $1,800.
c. Equipment purchased January 1 of the current year for $26,000 was estimated to have a useful life of 5 years with $1,000 salvage value.
d. Wages are paid each Friday for a 5-day week. The salary is set at a fixed rate of $800 per day, and the accounting period ended on Wednesday.
e. On November 1, the company accepted a $10,000, 12%, 9-month Note Receivable. An adjusting entry should be made to accrue the interest on this note.
f. The balance in Unearned Commissions Revenue at December 31, is $1,400. This represents a customer deposit for which one-half has been earned as of December 31.
McGILL COMPANY GENERAL JOURNAL
DATE ACCOUNT TITLES DR CR
PART B (30 Points)
Below is an Adjusted Trial Balance for Green Company for the year ended December 31. In the space provided on the next two pages:
Required: a. Record the appropriate closing entries. (Third line explanations are not necessary.) b. Prepare a Post-Closing Trial Balance.
GREEN COMPANY
Adjusted Trial Balance
December 31, 20xx
DEBIT CREDIT
Cash $ 1,150
Account Receivable 3,600
Office Supplies 1,500
Office Equipment 10,000
Accumulated Depreciation, Office Equipment $ 4,000
Accounts Payable 700
C.R. Green, Capital 8,000
C.R. Green, Drawing 1,200
Commissions Revenue 7,100
Interest Revenue 200
Depreciation Expense 200
Salary Expense 2,200
Utility Expense 150
TOTALS $ 20,000 $ 20,000
GREEN COMPANY GENERAL JOURNAL
DATE ACCOUNT TITLE DR CR
GREEN COMPANY
Post-Closing Trial Balance
December 31, 20xx
DEBIT CREDIT
PART C (16 Points)
ESSAY QUESTIONS
Required: For EACH of the two questions below, write at least one full paragraph in response to the question asked. Be sure each of your paragraphs has a topic sentence. Please pay attention to your spelling, grammar and punctuation. Do not plagiarize from your textbook or any other source. Be sure your answers are in your own words.
1. Explain why adjusting entries should be made at the end of an accounting period. There are two categories of adjusting entries, Accrual Adjustments and Deferral Adjustments. Explain each category fully and give at least one example of each.2. The long-term liability section of Beta Company’s Balance Sheet includes the following accounts:
Notes Payable (due in 5 years) $100,000
Mortgage Payable 250,000
Salaries Payable 75,000
Accumulated Depreciation 125,000
Total long-term liabilities $550,000
Beta Company is an established company and does not experience any financial difficulties or have any cash flow problems. Identify at least two items in the long-term liability section that are questionable and explain where the placement on the balance sheet would be more appropriate and why.
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