ACC 205 Week 2

E4-21 - Klein Photography

E4-21 Identifying and journalizing closing entries [10-15 min]

The accountant for Klein Photography has posted adjusting entries (a)(e) to the following selected accounts at December 31, 2012.

Requirements

1. Journalize Klein Photography's closing entries at December 31, 2012.

2. Determine Klein Photography's ending Klein, capital balance at December 31, 2012.

Ethical Issue 3-1 - Steinbach & Sons

Ethical Issue 3-1

The net income of Steinbach & Sons, a department store, decreased sharply during 2014. Mort Steinbach, manager of the store, anticipates the need for a bank loan in 2015. Late in 2014, Steinbach instructs the store's accountant to record a $2,000 sale of furniture to the Steinbach family, even though the goods will not be shipped from the manufacturer until January 2015. Steinbach also tells the accountant not to make the following December 31, 2014, adjusting entries:

Salaries owed to employees $900

Prepaid insurance that has expired 400

Requirements

1. Compute the overall effects of these transactions on the store's reported income for 2014.

2. Why is Steinbach taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by Steinbach's action. (Challenge)

3. As a personal friend, what advice would you give the accountant? (Challenge)

P3-32A - Laughter Landscaping

P3-32A Journalizing adjusting entries [1525 min]

Laughter Landscaping has the following independent cases at the end of the year on December 31, 2014.

a. Each Friday, Laughter pays employees for the current week's work. The amount of the weekly payroll is $7,000 for a five-day workweek. This year December 31 falls on a Wednesday.

a. Details of Prepaid insurance are shown in the account:

Laughter prepays a full year's insurance each year on January 1. Record insurance expense for the year ended December 31.

c. The beginning balance of Supplies was $4,000. During the year, Laughter purchased supplies for $5,200, and at December 31 the supplies on hand total $2,400.

d. Laughter designed a landscape plan, and the client paid Laughter $7,000 at the start of the project. Laughter recorded this amount as Unearned service revenue. The job will take several months to complete, and Laughter estimates that the company has earned 60% of the total revenue during the current year.

e. Depreciation for the current year includes Equipment, $3,700; and Trucks, $1,300. Make a compound entry.

Requirement

1. Journalize the adjusting entry needed on December 31, 2014, for each of the previous items affecting Laughter Landscaping.

P3-33A - Galant Theater Production Company

P3-33A Analyzing and journalizing adjustments [1520 min]

Galant Theater Production Company unadjusted and adjusted trial balances at December 31, 2012, follow.

Requirement

1. Journalize the adjusting entries that account for the differences between the two trial balances.

P4-25A - Fugazy Investment Advisers

P4-25A Preparing a worksheet, financial statements, and closing entries [50-60 min]

The trial balance of Fugazy Investment Advisers at December 31, 2012, follows:

Adjustment data at December 31, 2012:

a. Unearned service revenue earned during the year, $500.

b. Supplies on hand, $1,000.

c. Depreciation for the year, $6,000.

d. Accrued salary expense, $1,000.

e. Accrued service revenue, $4,000.

Requirements

1. Enter the account data in the Trial Balance columns of a worksheet, and complete the worksheet through the Adjusted Trial Balance. Key each adjusting entry by the letter corresponding to the data given. Leave a blank line under Service revenue.

2. Prepare the income statement, the statement of owner's equity, and the classified balance sheet in account format.

3. Prepare closing journal entries from the worksheet.

4. Did the company have a good or a bad year during 2012? Give the reason for your answer. (Challenge)

ACC205 Principles of Accounting I

Horngren, C.T., Harrison W.T., Oliver M.S. (2011). Accounting (9th ed). Upper Saddle River, New Jersey: Pearson Prentice Hall: ISBN: 9780132569057

1st Posting Due by Day 3. Complete the Accounting Cycle. Explain the purpose of adjusting entries. How is net income affected if adjusting entries are not made? Describe the four closing entries and explain their purpose.