You have been engaged to review the financial statements of Tamarisk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows.

Prepare the necessary correcting entries, assuming that Tamarisk uses a calendar-year basis. The books for the current year have not been closed.

Prepare the adjusted trial balance on December 31, 20X6. Attach your response in an excel or word file.

Questions 4 through 10 are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year.                                                 

                Cash……………..…………………………….250,000

                Accounts receivable…………………….……..680,000

                Marketable securities…………………………...60,000

                Prepaid insurance……………………………….35,000

                Prepaid rent….………………………………….30,000

                Office equipment…………………………….....620,000

                Accumulated depreciation: equipment………...200,000

                Land……………………………………………750,000

                Accounts payable………………………………306,000

                Dividends payable……………………………… 50,000

                Interest payable…………………………………... 8,750

                Income tax payable……………………………...30,000

                Unearned client service revenue………………..180,000

                Notes payable (long-term).……………………..350,000

                Common stock………………………………….750,000

                Retained earnings….…………………………....315,200

                Dividends…………………………………….......75,000

                Client service revenue………………………...1,200,000

                Travel expense………………………………..…..28,000

                Office supplies expense…………………………..20,000

                Advertising expense………………………………45,000

                Salary expense…………………………………...400,000

                Utility expense………………………………….....40,000

                Depreciation expense: equipment…………………25,000

                Interest expense……………………………….…...17,500

                Insurance expense……………………………….....52,000

                Rent expense……………………………………..175,000

                Income tax expense………………………………..87,450

Exercise 3-11 (Video)

A partial adjusted trial balance of Skysong, Inc. at January 31, 2020, shows the following.

Answer the following questions, assuming the year begins January 1.

(a)

If the amount in Supplies Expense is the January 31 adjusting entry and $1,200 of supplies was purchased in January, what was the balance in Supplies on January 1?

(b)

If the amount in Insurance Expense is the January 31 adjusting entry and the original insurance premium was for one year, what was the total premium and when was the policy purchased?

(c)

If $3,700 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2019?

Example Three:

Use a Trial Balance to:

Calculate Gross Profit (Gross Margin), Current Assets, Long-Term Assets (PPE), Current Liabilities, and Long-Term Liabilities

Prepare Closing Entries, and

Calculate ending balance in Retained Earnings.

Calculate

gross profit (gross margin) ________________

total current assets __________________

total long-term (PPE) assets ________________

total current liabilities ________________

total long-term liabilities ________________

Prepare the Closing Entries.

Calculate the ending balance of retained earnings_________________________.

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

Break-Even Analysis Media outlets such as ESPN and FOX Sports often have Web sites that provide in-depth coverage of news and events. Portions of these Web sites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These Web sites typically offer a free trial period to introduce viewers to the Web site. Assume that during a recent fiscal year, ESPN.com spent $2,737,800 on a promotional campaign for the ESPN.com Web site that offered two free months of service for new subscribers. In addition, assume the following information: Number of months an average new customer stays with the service (including the two free months) 20 months Revenue per month per customer subscription $28 Variable cost per month per customer subscription $9 Determine the number of new customer accounts needed to break even on the cost of the promotional campaign. In forming your answer, (1) treat the cost of the promotional campaign as a fixed cost, and (2) treat the revenue less variable cost per account for the subscription period as the unit contribution margin. accounts

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,700 plus $32 per job, and the actual mobile lab operating expenses for February were $9,020. The company expected to work 140 jobs in February, but actually worked 148 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

1. Mr. Sokol and Ms. Rivera are two candidates for the same advertising manager position.
   
   Sokol has a consistent history of designing and implementing successful marketing campaigns. You as the potential employer have 100% certainty he will succeed if you hire him and bring in $800,000 more revenue each year.
   
   Rivera is a magazine writer and editor who has no experience in advertising but wants to break into this field. She has a track record of succeeding in all her previous jobs, speaks well, and writes persuasively. If you hire her, you feel she has a 60% chance of succeeding and bring $1,200,000 revenue to you company this year and a 40% chance of losing $500,000 for your firm this year.
   
   Each candidate if hired will be paid $100,000 and you only have one opening. If the candidate is successful, you expect him or her to stay with your company for three years. If the candidate lost money for your company, you would terminate him of her after the first year.
   
   A) Please determine the expected value of each candidate if hired.
   
   

B) If you are risk neutral, which candidate would be the better hire?

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,425,000. During 2018, costs of $2,170,000 were incurred, with estimated costs of $4,170,000 yet to be incurred. Billings of $2,704,000 were sent, and cash collected was $2,420,000.

In 2019, costs incurred were $2,704,000 with remaining costs estimated to be $3,855,000. 2019 billings were $2,954,000, and $2,645,000 cash was collected. The project was completed in 2020 after additional costs of $3,970,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.

Required:
1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.