Group Work – Chapters 1-4
1. Prepare an adjusting journal entry for XYZ Co. for each of the following transactions. Assume the date
is December 31, 2012, and XYZ Co. is adjusting account balances in order to prepare and distribute yearly
Financial Statements.
a. XYZ Co. borrowed $40,000 on a 8-mth note at 9% on October 1, 2012. Interest and Principal are due
at June 1, 2013. Today is December 31, 2012. Prepare an adjusting entry regarding this borrowing.
Interest Expense
900
Interest Payable
900
b. The Supplies asset account had a December 1, 2012 beginning balance of $1,200. During the month of
December, Supplies costing $6,200 were purchased. A count of the Supplies on hand at December 31,
2012 indicates $2,900 of Supplies remain in the storeroom. Prepare an adjusting entry for supplies at
December 31, 2012.
Supplies Expense
4,500
Supplies (Asset)
4,500
c. XYZ Co. purchased Equipment last year for $25,000. The equipment has an estimated useful life of 10
years and an estimated salvage value of $3,000. XYZ Co. uses straight line depreciation. Prepare an
adjusting entry for equipment at December 31, 2012.
Depreciation Expense
2,200
Accumulated Depreciation 2,200
d. On November 1, 2012, XYZ Co. paid $2,400 to the building landlord for 3 months rent in advance.
The Prepaid Rent account increased on that date. Prepare the adjusting entry at December 31, 2012.
Rent Expense
Prepaid Rent
1,600
1,600
e. During December XYZ Co. received $7,000 cash from a customer for special ordered goods to be
delivered at a later date. At the time of the cash receipt, Unearned Revenue was increased. At
December 31, 2012, $3,000 worth of goods for the special order has been delivered to the customer.
Prepare an adjusting entry regarding this delivery.
Unearned Revenue
Sales Revenue
3,000
3,000
2. ABC Co. started the year with a beginning balance for total Assets of $305,000 and total Liabilities of
$180,000. During the year, total Revenues were $205,000; total Expenses were $218,000; and
Dividends of $25,000 were paid at year end. Assume no additional Contributed Capital was received in
the year, what would the Ending Balance of Owners’ Equity for the year?
$87,000
3.
On January 1, ABC showed a balance in the Supplies Asset account of $9,200. The Income
Statement shows that Supplies Expense (amounts used up) for the period was $9,900. The ending
balance of the Supplies account at December 31st is $10,800. How much in Supplies must have been
purchased in the current year?
$11,500
4.
XYZ had a $28,000 balance in Accounts Receivable at the beginning of the year and a $39,000
balance at the end of the year. All Sales for XYZ are sold on account [all sales go through Accounts
Receivable]. XYZ reported Sales of $180,000 during the year. How much cash must have been
collected from customers during the year?
$169,000
5.
Identify the following accounts as Temporary (T) or Permanent (P). Temporary accounts are closed to
Retained Earnings at Year-end. Permanent accounts are not closed out – their balances carry forward to
the new year.
6.
Accounts Receivable
__P__
Dividends
__T__
Cost of Goods Sold
__T__
Building
__P__
Common Stock
__P__
Retained Earnings
__P__
Note Payable
__P__
Interest Revenue
__T__
Interest Expense
__T__
Inventory
__P__
XYZ had the following accounts balances at year end.
Accounts Payable
Accounts Receivable
Accumulated Depreciation
Cash
Common Stock
Operating Expenses
Unearned Revenue
Retained Earnings (Beginning Balance)
Taxes
$15,100
$18,200
$12,600
$15,500
$40,000
$104,200
$2,600
$32,500
$10,200
Interest Expense
Interest Revenue
Inventory
Notes Payable (due in 2 years)
Operating Revenues
Prepaid Rent
Equipment
Dividends
What is the total of Current Assets?
$81,100
What is Total Assets?
$150,500
What is the total of Current Liabilities?
$17,700
What is Total Liabilities?
$52,700
What is Operating Income?
$50,000
What is Pretax Income?
$49,500
What is Net Income?
$39,300
What should be the end-of-year balance in Retained Earnings on the Balance Sheet?
$4,100
$3,600
$45,800
$35,000
$154,200
$1,600
$82,000
$14,000
$57,800