Question

4a. What adjusting entries should Tangent Company make at December 31, 20xx for the following 3 circumstances: a) it purchased a 3 year insurance policy for $9,000 on January 1, 20xx; b) it received an advance payment of $12,000 for 3 years of advertising on January 1, 20xx; and its accrued wage expense on Wednesday December 31, 20xx during a week when it would pay wages in cash for the 5 days work on January 2 mounting to $5,000.

4b. During 2017, Cube Company had net income of $100,000. It also recorded depreciation expense of $150,000. During that same year its receivable balance increased by $10,000, its inventory balance increased by $20,000 and its accounts payable account increased by $10,000. Using the indirect method calculate Cube Company’s net cash from operations in 2017.

Answer 1

4a. Adjusting entries Tangent Company will make at December 31, 20xx for the following 3 circumstances are:

	Date	Particulars	L.F	Amount ($)	Amount ($)
a	Dec-31	Insurance Expense (9,000/3*1)		3,000
		Prepaid insurance			3,000
		(for one year insurance expired)
b	Dec-31	Unearned Revenue		4,000
		Service Revenue (12,000/3*1)			4,000
		(For one year revenue earned)
c	Dec-31	Wages Expense		5,000
		Wages Payable			5,000
		(for wage earned but not paid)

4b. Cube Company’s net cash from operations in 2017 is

Cube Company
Statement of Operating Cash Flows
For the year ended December 31, 20XX
Particulars	Amount ($)	Amount ($)
Cash Flows from operating activities:
Net Income		100,000
Adjustments to reconcile net income to net cash:
Depreciation expense	150,000
Increase in account receivable	-10,000
Increase in Inventory	-20,000
Increase in accounts payable	10,000
Net Cash flows from Operating Activities (given)		230,000