FUND.ACCT.PRIN.
25th Edition
ISBN: 9781260247985
Author: Wild
Publisher: RENT MCG
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Textbook Question
Chapter 3, Problem 5PSB
Problem 3-6B
Recording prepaid expenses and unearned revenues
P4
Tremor Co. had the following transactions in the last two months of its fiscal year ended May 31. (Entries can draw from the following partial chart of accounts: Cash; Prepaid Insurance; Prepaid Advertising; Prepaid Consulting Fees; Unearned Service Fees; Services Fees Earned ;Insurance Expense; Advertising Expense; Consulting Fees Expense.)
Apr. 1- Paid $2,450 cash to an accounting firm for future consulting services.
1- Paid $3,600 cash for 12 months of insurance through March 31 of the next year.
30- Received $8,500 cash for future services to be provided to a customer.
May 1- Paid $4,450 cash for future newspaper advertising.
23- Received $10,450 cash for future services to be provided to a customer.
31- Of the consulting services paid for on April 1, $2,000 worth has been performed.
31- A portion of the insurance paid for on April 1 has expired. No adjustment was made in April to Prepaid Insurance.
31- Services worth $4,600 are not yet provided to the customer who paid on April
30.
31- Of the advertising paid for on May 1, $2,050 worth is not yet used.
31- The company has performed $5,500 of services that the customer paid for on May
23.
Required
1. Prepare entries for these transactions under the method that initially records prepaid expenses and unearned revenues in
2. Prepare entries for these transactions under the method that initially records prepaid expenses and unearned revenues in income statement accounts. Also prepare adjusting entries at the end of the year.
Analysis Component
3. Explain why the alternative sets of entries in parts 1 and 2 do not result in different financial statement amounts.
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Revenue and Cash Receipts Journals
Lasting Summer Inc. has $1,840 in the October 1 balance of the accounts receivable account consisting of $850 from Champion Co. and $990 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 20Y5 are as follows:
Oct. 3.
Issued Invoice No. 622 for services provided to Palace Corp., $1,930.
5.
Received cash from Champion Co., on account, for $850.
8.
Issued Invoice No. 623 for services provided to Sunny Style Inc., $3,330.
12.
Received cash from Wayfarer Co., on account, for $990.
18.
Issued Invoice No. 624 for services provided to Amex Services Inc., $2,340.
23.
Received cash from Palace Corp. for Invoice No. 622 of October 3.
28.
Issued Invoice No. 625 to Wayfarer Co., on account, for $1,970.
30.
Received cash from Rogers Co. for services provided, $70.
a. Prepare a single-column revenue journal to record these transactions. Enter…
Task 2:
Evaluate the company's efficiency in collecting its accounts receivable during the fiscal year ended 31
December 2021. Use the company's information from its annual reports:
Receivables as of 31 December 2020
Receivables as of 31 December 2021
$4,468,392
$4,972,722
$45,349,943
Sales revenue for year ended 31 December 2021
1. Calculate the company's number of days of sales outstanding (DSO) for the fiscal year ended 31
December 2021. (Use the average receivables to calculate the ratio).
Net
= 2.37
=
Accounting receivable:
Average
Day's sales in receivable = 154.
2. Interpret the calculated ratio.
3. Assume that the industry average DSO ratio is 60 days. Based on this information and the subject
company's DSO ratio, critically evaluate the company's credit policy and its implications.
Chapter 3 Solutions
FUND.ACCT.PRIN.
Ch. 3 - Periodic reporting C1 Choose from the following...Ch. 3 - Prob. 2QSCh. 3 - Identifying accounting adjustments Classify the...Ch. 3 - Concepts 0f adjusting entries During the year, a...Ch. 3 - Prepaid (deferred) expenses adjustments Pl For...Ch. 3 - Prepaid (deferred) expenses adjustments For each...Ch. 3 - Prob. 7QSCh. 3 - Accumulated depreciation adjustments Pl For each...Ch. 3 - Adjusting for depreciation P1 For each separate...Ch. 3 - Unearned (deferred) revenues adjustments For each...
Ch. 3 - Adjusting for unearned (deferred) revenues P2 For...Ch. 3 - Accrued expenses adjustments Pl For each separate...Ch. 3 - Prob. 13QSCh. 3 - Accrued revenues adjustments P4 For each separate...Ch. 3 - Recording and analysing adjusting entries A1...Ch. 3 - QS3-16
Determining effects of adjusting...Ch. 3 - Preparing an adjusted trial balance P5 Following...Ch. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - Preparing adjusting entries P4 Garcia Company had...Ch. 3 - Preparing adjusting entries P4 Cal Consulting...Ch. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Exercise 3-6 Preparing adjusting entries P1 P2 P3...Ch. 3 - Prob. 7ECh. 3 - Prob. 8ECh. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Exercise 3-14 Preparing adjusting entries P1 P2 P3...Ch. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 3 - Prob. 17ECh. 3 - Prob. 18ECh. 3 - Prob. 19ECh. 3 - Prob. 20ECh. 3 - Problem 3-1A Identifying adjusting entries with...Ch. 3 - Problem 3-2B Preparing adjusting and subsequent...Ch. 3 - Problem 3-3A Preparing adjusting entries, adjusted...Ch. 3 - Problem 3-5A Preparing financial statements from...Ch. 3 - Problem 3-6A
Recording prepaid expenses and...Ch. 3 - Prob. 1PSBCh. 3 - Problem 3-2B Preparing adjusting and subsequent...Ch. 3 - Problem 3-3B Preparing adjusting entries, adjusted...Ch. 3 - Problem 3-5B Preparing financial statements from...Ch. 3 - Problem 3-6B Recording prepaid expenses and...Ch. 3 - Prob. 3SPCh. 3 - Prob. 1GLPCh. 3 - Using transactions from the following assignments,...Ch. 3 - Using transactions from the following assignments,...Ch. 3 - Prob. 4GLPCh. 3 - Prob. 5GLPCh. 3 - Prob. 1AACh. 3 - Key figures for the recent two years of both Apple...Ch. 3 - Key comparative figures for Samsung. Apple, and...Ch. 3 - Prob. 1DQCh. 3 - Why is the accrual basis of accounting generally...Ch. 3 - Prob. 3DQCh. 3 - What is a prepaid expense and where is it reported...Ch. 3 - What type of assets requires adjusting entries to...Ch. 3 - 6. What contra account is used when recording and...Ch. 3 - What is an accrued revenue? Give an example..Ch. 3 - 8. If a company initially records prepaid expenses...Ch. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Access EDGAR online (SEC.gov) and locate the...Ch. 3 - Prob. 4BTN
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