Accounting Principles I – Chapters 3 & 4 – Exam – Part II

| July 29, 2018

Accounting Principles I – Online Chapters 3 & 4 – Exam – Part IIComplete the following activity and save this file on your hard drive. Then submit your file to your instructor on Canvas.PART A (24 Points) In the journal for McGill Company provided below, record the appropriate adjusting entries as of December 31. Please note that McGill Company has not prepared any adjusting entries for the current year prior to December 31. a. The Store Supplies account showed a beginning balance of $700 and purchases of $500. Unused store supplies at the end of the year were counted and totaled $300.b. On December 1, the company paid three months rent in advance, debiting Prepaid Rent for $1,800. c. Equipment purchased January 1 of the current year for $26,000 was estimated to have a useful life of 5 years with $1,000 salvage value. d. Wages are paid each Friday for a 5-day week. The salary is set at a fixed rate of $800 per day, and the accounting period ended on Wednesday. e. On November 1, the company accepted a $10,000, 12%, 9-month Note Receivable. An adjusting entry should be made to accrue the interest on this note. f. The balance in Unearned Commissions Revenue at December 31, is $1,400. This represents a customer deposit for which one-half has been earned as of December 31. McGILL COMPANY GENERAL JOURNALDATE ACCOUNT TITLES DR CRPART B (30 Points) Below is an Adjusted Trial Balance for Green Company for the year ended December 31. In the space provided on the next two pages:Required: a. Record the appropriate closing entries. (Third line explanations are not necessary.) b. Prepare a Post-Closing Trial Balance. GREEN COMPANYAdjusted Trial BalanceDecember 31, 20xx DEBIT CREDITCash $ 1,150 Account Receivable 3,600 Office Supplies 1,500 Office Equipment 10,000 Accumulated Depreciation, Office Equipment $ 4,000Accounts Payable 700C.R. Green, Capital 8,000C.R. Green, Drawing 1,200 Commissions Revenue 7,100Interest Revenue 200Depreciation Expense 200 Salary Expense 2,200 Utility Expense 150 TOTALS $ 20,000 $ 20,000GREEN COMPANY GENERAL JOURNALDATE ACCOUNT TITLE DR CR GREEN COMPANYPost-Closing Trial BalanceDecember 31, 20xx DEBIT CREDIT PART C (16 Points)ESSAY QUESTIONSRequired: For EACH of the two questions below, write at least one full paragraph in response to the question asked. Be sure each of your paragraphs has a topic sentence. Please pay attention to your spelling, grammar and punctuation. Do not plagiarize from your textbook or any other source. Be sure your answers are in your own words.1. Explain why adjusting entries should be made at the end of an accounting period. There are two categories of adjusting entries, Accrual Adjustments and Deferral Adjustments. Explain each category fully and give at least one example of each.2. The long-term liability section of Beta Company’s Balance Sheet includes the following accounts:Notes Payable (due in 5 years) $100,000Mortgage Payable 250,000Salaries Payable 75,000Accumulated Depreciation 125,000 Total long-term liabilities $550,000Beta Company is an established company and does not experience any financial difficulties or have any cash flow problems. Identify at least two items in the long-term liability section that are questionable and explain where the placement on the balance sheet would be more appropriate and why.

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