On March 5, 2018, you were hired by Stellar Inc., a closely held
company, as a staff member of its newly created internal auditing
department. While reviewing the company’s records for 2016 and
2017, you discover that no adjustments have yet been made for the
items listed below.
| Items | ||
| 1. | Interest income of $14,200 was not accrued at the end of 2016. It was recorded when received in February 2017. | |
| 2. | A computer costing $4,000 was expensed when purchased on July 1, 2016. It is expected to have a 4-year life with no salvage value. The company typically uses straight-line depreciation for all fixed assets. | |
| 3. | Research and development costs of $35,100 were incurred early in 2016. They were capitalized and were to be amortized over a 3-year period. Amortization of $11,700 was recorded for 2016 and $11,700 for 2017. | |
| 4. | On January 2, 2016, Stellar leased a building for 5 years at a monthly rental of $8,700. On that date, the company paid the following amounts, which were expensed when paid. |
| Security deposit | $21,300 | |
| First month’s rent | 8,700 | |
| Last month’s rent | 8,700 | |
| $38,700 |
| 5. | The company received $39,300 from a customer at the beginning of 2016 for services that it is to perform evenly over a 3-year period beginning in 2016. None of the amount received was reported as unearned revenue at the end of 2016. | |
| 6. | Merchandise inventory costing $17,700 was in the warehouse at December 31, 2016, but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory method. |
Indicate the effect of any errors on the net income figure reported
on the income statement for the year ending December 31, 2016, and
the retained earnings figure reported on the balance sheet at
December 31, 2017. Assume all amounts are material, and ignore
income tax effects. Using the following format, enter the
appropriate dollar amounts in the appropriate columns. Consider
each item independent of the other items. It is not necessary to
total the columns on the grid.
In: Accounting
Baltic Supplies presented the following unadjusted trial balance as at December 31, 2016
| Accounts | Debit | Credit |
| cash | ||
| Accounts Receivable | 410,000 | |
| Merchandise Inventory | 330,000 | |
| Store supplies | 144,800 | |
| Prepaid Insurance Expense | 156,000 | |
| Building and Equipment | 800,000 | |
| Accumulated depreciation- Building and Equipment | 237,000 | |
| Accounts payable | 435,000 | |
| Travelling expense payable | ||
| unearned sales revenue | 220,000 | |
| Note payable long term | 345,000 | |
| Baltic capital | 1,791,900 | |
| Baltic Withdrawal | 35,000 | |
| Sales revenue earned | 917,000 | |
| Sales discount | 35,000 | |
| Sales returns and allowances | 42,100 | |
| Cost of goods sold | 585,000 | |
| Salaries expense | 300,000 | |
| Telephone expense | 33,000 | |
| Depreciation expense- building and equipment | ||
| Insurance expense | 182,000 | |
| Store supplies expense | 45,200 | |
| Electricity expense | 85,000 | |
| bad debt expense | 49,500 | |
| Travelling expense | 62,000 | |
| Interest expense | 31,300 | |
| 3,945,900 | 3,945,900 |
The following information was made available at December 31, 2016
A.) Unearned revenue still not earned at December 31, 2016 amounted 120,000
B.) The prepaid insurance of 156,000 was paid on August 1, 2016 for 6 months to January 2017
C.) The building and equipment has an estimated life of (10) years and is being depreciated on the straight line method of depreciation, down to residual value of 10,000
D.) Accrued travelling expense amounted to 2,300 at December 31, 2016
E.) A physical count of inventory at December 31, 2016, reveals 315,000 worth of inventory on hand
Required to:
1 Prepare the necessary adjusting entries on December 31, 2016
2 Prepare the adjusted trial balance as at December 31, 2016
3 Prepare the company multi-step Income Statement for the year ended December 31, 2016
4 Prepare the company statement of Owner's Equity for the year ended December 31, 2016
5 Prepare the company classified Balance Sheet at December 31, 2016
In: Accounting
On March 5, 2018, you were hired by Waterway Inc., a closely
held company, as a staff member of its newly created internal
auditing department. While reviewing the company’s records for 2016
and 2017, you discover that no adjustments have yet been made for
the items listed below.
| Items | ||
| 1. | Interest income of $15,000 was not accrued at the end of 2016. It was recorded when received in February 2017. | |
| 2. | A computer costing $4,000 was expensed when purchased on July 1, 2016. It is expected to have a 4-year life with no salvage value. The company typically uses straight-line depreciation for all fixed assets. | |
| 3. | Research and development costs of $33,600 were incurred early in 2016. They were capitalized and were to be amortized over a 3-year period. Amortization of $11,200 was recorded for 2016 and $11,200 for 2017. | |
| 4. | On January 2, 2016, Waterway leased a building for 5 years at a monthly rental of $8,400. On that date, the company paid the following amounts, which were expensed when paid. |
| Security deposit | $20,100 | |
| First month’s rent | 8,400 | |
| Last month’s rent | 8,400 | |
| $36,900 |
| 5. | The company received $39,300 from a customer at the beginning of 2016 for services that it is to perform evenly over a 3-year period beginning in 2016. None of the amount received was reported as unearned revenue at the end of 2016. | |
| 6. | Merchandise inventory costing $18,900 was in the warehouse at December 31, 2016, but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory method. |
Indicate the effect of any errors on the net income figure reported
on the income statement for the year ending December 31, 2016, and
the retained earnings figure reported on the balance sheet at
December 31, 2017. Assume all amounts are material, and ignore
income tax effects. Using the following format, enter the
appropriate dollar amounts in the appropriate columns. Consider
each item independent of the other items. It is not necessary to
total the columns on the grid.
In: Accounting
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