Week2.

notebook

September15,2016

PreparethenecessaryadjustingentriesatDecember31,
2013,fortheMicrochipCompanyforeachofthe
followingsituations.Assumethatnofinancialstatements
werepreparedduringtheyearandnoadjustingentries
wererecorded.
1. OnOctober1,2013,Microchiplent$90,000to
anothercompany.Anotewassignedwithprincipal
and8%interesttobepaidonSeptember30,2014.
2. OnNovember1,2013,thecompanypaidits
landlord$6,000representingrentforthemonthsof
NovemberthroughJanuary.Prepaidrentwas
debited.
3. OnAugust1,2013,collected$12,000inadvance
rentfromanothercompanythatisrentingaportion
ofMicrochip'sfactory.The$12,000representsone
year'srentandtheentireamountwascreditedtorent
revenue.
4. Depreciationonmachineryis$4,500fortheyear.
5. Vacationpayfortheyearthathadbeenearnedby
employeesbutnotpaidtothemorrecordedis
$8,000.
6. Microchipbegantheyearwith$2,000initsasset
account,supplies.Duringtheyear,$6,500in
supplieswerepurchasedanddebitedtosupplies.At
yearend,suppliescosting$3,250remainonhand.

Sep148:03PM

Week2.notebook

September15,2016

PreparethenecessaryadjustingentriesatDecember31,2013,fortheFalwellCompanyforeachofthefollowingsituations.Assumethatnofinancial
statementswerepreparedduringtheyearandnoadjustingentrieswererecorded.
1.

AthreeyearfireinsurancepolicywaspurchasedonJuly1,2013,for$12,000.Thecompanydebitedinsuranceexpensefortheentire
amount.

2.

Depreciationonequipmenttotaled$15,000fortheyear.

3.

Employeesalariesof$18,000forthemonthofDecemberwillbepaidinearlyJanuary2014.

4.

OnNovember1,2013,thecompanyborrowed$200,000fromabank.Thenoterequiresprincipalandinterestat12%tobepaidonApril
30,2014.

5.

OnDecember1,2013,thecompanyreceived$3,000incashfromanothercompanythatisrentingofficespaceinFalwell'sbuilding.The
payment,representingrentforDecemberandJanuary,wascreditedtounearnedrentrevenue.

Sep148:09PM

Week2.notebook

September15,2016

StanleyandJonesLawnServiceCompany(S&J)maintainsitsbooksonacashbasis.However,thecompanyrecentlyborrowed$100,000froma
localbankandthebankrequiresS&Jtoprovideannualfinancialstatementspreparedonanaccrualbasis.During2013,thefollowingcashflows
wererecorded:

Youareabletodeterminethefollowinginformationaboutaccountsreceivable,prepaidexpenses,andaccruedliabilities:

Inaddition,youlearnthatthebankloanwasdatedSeptember30,2013,withprincipalandinterestat6%dueinoneyear.Depreciationonthe
company'sequipmentis$10,000fortheyear.
Required:
Prepareanaccrualbasisincomestatementfor2013.(Ignoreincometaxes.)

Sep148:10PM

Week2.notebook

September15,2016

HaskinsandJones,AttorneysatLaw,maintainitsbooksonacashbasis.During2013,thecompanycollected$545,000infeesfromitsclientsand
paidout$412,000inexpenses.Youareabletodeterminethefollowinginformationaboutaccountsreceivable,prepaidexpenses,unearnedfee
revenue,andaccruedliabilities:

Inaddition,2013depreciationexpenseonfurnitureandfixturesis$22,000.
Required:
Determineaccrualbasisnetincomefor2013.

Sep148:14PM