NameNAMEDate Ex1NAMEProblem 1Recognition of ConceptsTransactionClassificationaInterest owed on the company's bank loan, to be paid in early JulybProfessional fees earned but not billed as of June 30cOffice supplies on hand at year-enddAn advance payment from a client for a performance next month at a conventioneThe payment in part (d) from the client's point of viewfAmounts paid on June 30 for a 1-year insurance policygThe bank loan payable in part (a)hRepairs to the firm's copy machine, incurred and paid in June Ex2Problem 2Understanding the closing process. a. appear on a post-closing trial balance? b. are commonly known as temporary, or nominal, accounts? c. generate a debit to Income Summary in the closing process? d. are closed to the capital account in the closing process? Ex3Problem 3Adjusting entries and financial statements. The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned.a.BDRCRb.Unearned Revenue Revenuec.Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31.a.DRCRb.Accounts Receivable Revenuec.Salaries owed to employees at year-end amounted to $1,000.a.DRCRb.Salary Expense Salaries Payablec.The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.a.DRCRb.Supplies Expense Supplies Inventoryc.The company paid $18,000 on October 1 of the current year to Vantage Property Management. The payment was for 6 months’ rent of Sally Corporation’s headquarters, beginning on November 1.a.DRCRb.Rent Expense Prepaid Rentc. Ex4Problem 4Adjusting entriesDRCROn January 1, 20X3, the Supplies account had a balance of $1,350. During the year, $5,520 worth of supplies was purchased, and a balance of $1,620 remained unused on December 31.1Supply expense SuppliesExplanation:Unrecorded interest owed to the center totaled $275 as of December 31.2Interest Receivable Interest RevenueExplanation:All clients pay tuition in advance, and their payments are credited to the Unearned Tuition Revenue account. The account was credited for $65,500 on August 31. With the exception of $15,500 all amounts were for the current semester ending on December 31.3Unearned Tuition Revenue account RevenueExplanation:Depreciation on the school’s van was $3,000 for the year.4Depreciation expense - van Accumulated depreciation - vanExplanation:On August 1, the center began to pay rent in 6-month installments of $24,000. Mary wrote a check to the owner of the building and recorded the check in Pre­paid Rent, a new account.5Rent expense Prepaid rentExplanation:Two salaried employees earn $400 each for a 5-day week. The employees are paid every Friday, and December 31 falls on a Thursday.6Salary expense Salaries payableExplanation:Mary’s Day Care paid insurance premiums as follows, each time debiting Pre­p.

1. NameNAMEDate
Ex1NAMEProblem 1Recognition of
ConceptsTransactionClassificationaInterest owed on the
company's bank loan, to be paid in early JulybProfessional fees
earned but not billed as of June 30cOffice supplies on hand at
year-enddAn advance payment from a client for a performance
next month at a conventioneThe payment in part (d) from the
client's point of viewfAmounts paid on June 30 for a 1-year
insurance policygThe bank loan payable in part (a)hRepairs to
the firm's copy machine, incurred and paid in June
Ex2Problem 2Understanding the closing process. a. appear on a
post-closing trial balance? b. are commonly known as
temporary, or nominal, accounts? c. generate a debit to Income
Summary in the closing process? d. are closed to the capital
account in the closing process?
Ex3Problem 3Adjusting entries and financial statements. The
company previously collected $1,500 as an advance payment for
services to be rendered in the future. By the end of December,
one half of this amount had been earned.a.BDRCRb.Unearned
Revenue Revenuec.Sally Corporation provided $1,500 of
services to Artech Corporation; no billing had been made by
December 31.a.DRCRb.Accounts Receivable
Revenuec.Salaries owed to employees at year-end amounted to
$1,000.a.DRCRb.Salary Expense Salaries Payablec.The
Supplies account revealed a balance of $8,800, yet only $3,300
of supplies were actually on hand at the end of the
period.a.DRCRb.Supplies Expense Supplies Inventoryc.The
company paid $18,000 on October 1 of the current year to
Vantage Property Management. The payment was for 6 months’
rent of Sally Corporation’s headquarters, beginning on
November 1.a.DRCRb.Rent Expense Prepaid Rentc.
Ex4Problem 4Adjusting entriesDRCROn January 1, 20X3, the
Supplies account had a balance of $1,350. During the year,
$5,520 worth of supplies was purchased, and a balance of

2. $1,620 remained unused on December 31.1Supply expense
SuppliesExplanation:Unrecorded interest owed to the center
totaled $275 as of December 31.2Interest Receivable Interest
RevenueExplanation:All clients pay tuition in advance, and
their payments are credited to the Unearned Tuition Revenue
account. The account was credited for $65,500 on August 31.
With the exception of $15,500 all amounts were for the current
semester ending on December 31.3Unearned Tuition Revenue
account RevenueExplanation:Depreciation on the school’s van
was $3,000 for the year.4Depreciation expense - van
Accumulated depreciation - vanExplanation:On August 1, the
center began to pay rent in 6-month installments of $24,000.
Mary wrote a check to the owner of the building and recorded
the check in Pre-paid Rent, a new account.5Rent expense
Prepaid rentExplanation:Two salaried employees earn $400 each
for a 5-day week. The employees are paid every Friday, and
December 31 falls on a Thursday.6Salary expense Salaries
payableExplanation:Mary’s Day Care paid insurance premiums
as follows, each time debiting Pre-paid Insurance:7Insurance
Expense Prepaid InsuranceExplanation:
Ex5Problem 5Bank reconciliation and entries. a.
ReceonciliationBalance per BankAdd: Deposits in
transitDeduct: Outstanding checksReconciled balanceBalance
per booksAdd: Interest collected for note Note collected
by bankDeduct: Bank service charge NSF
checkReconciled balanceAdjusting Journal Entries1DRCRBank
service charges Cash2Cash Interest revenue3Cash Notes
Receivable4Accounts receivable Cash
Ex6Problem 6a. Prepare the journal entry needed to write off
Mattingly’s account. DRCRBad Debts expense Accounts
receivableb. Comment on the ability of the direct write-off
method to value receivables on the year-end balance sheet.
Ex7Problem 7Allowance method: analysis of receivables. a.
Estimate the amount of Uncollectible Accounts as of December
31, 20X2. Age of Receivable Amount Percentage of Accounts
Expected to Be Collected Uncollectible

3. percentAmountUncollectibleUnder 31 days31-60 days61-90
daysOver 90 daysb. What is the company’s Uncollectible
Accounts expense for 20X2? The uncollectible accounts expense
would require the following entry based upon the above
calculationDRCRBad Debt Allowance Allowance for
Doutbtful Accountsc. Compute the net realizable value of
Accounts Receivable at the end of 20X1 and 20X2.
20X220X1Accounts receivableAllowanceNet Realizable valued.
Compute the net realizable value at the end of 20X1 and 20X2
as a percentage of respective year-end receivables balances.
Analyze your findings and comment on the president’s decision
to close the credit evaluation department.20X220X1Accounts
receivableNet Realizable valueNet Realizable value as a % of
receivablesExplanantion:
BWeek Two Exercise Assignment
Revenue and Expenses
1. Recognition of concepts. Jim Armstrong operates a small
company that books entertainers for theaters, parties,
conventions, and so forth. The company’s fiscal year ends on
June 30. Consider the following items and classify each as
either (1) prepaid expense, (2) unearned revenue, (3) accrued
expense, (4) accrued revenue, or (5) none of the foregoing.
a Interest owed on the company's bank loan, to be paid in
early July
b Professional fees earned but not billed as of June 30
c Office supplies on hand at year-end
d An advance payment from a client for a performance next
month at a convention
e The payment in part (d) from the client's point of view
f Amounts paid on June 30 for a 1-year insurance policy
g The bank loan payable in part (a)

4. h Repairs to the firm's copy machine, incurred and paid in
June
2. Understanding the closing process. Examine the following
list of accounts:
Note Payable
Accumulated Depreciation: Building
Alex Kenzy, Drawing
Accounts Payable
Product Revenue
Cash
Accounts Receivable
Supplies Expense
Utility Expense
Which of the preceding accounts
a. appear on a post-closing trial balance?
b. are commonly known as temporary, or nominal, accounts?
c. generate a debit to Income Summary in the closing process?
d. are closed to the capital account in the closing process?
3. Adjusting entries and financial statements. The following
information pertains to Sally Corporation:
· The company previously collected $1,500 as an advance
payment for services to be rendered in the future. By the end of
December, one half of this amount had been earned.
· Sally Corporation provided $1,500 of services to Artech
Corporation; no billing had been made by December 31.
· Salaries owed to employees at year-end amounted to $1,000.
· The Supplies account revealed a balance of $8,800, yet only
$3,300 of supplies were actually on hand at the end of the
period.
· The company paid $18,000 on October 1 of the current year to
Vantage Property Management. The payment was for 6 months’
rent of Sally Corporation’s headquarters, beginning on
November 1.

5. Sally Corporation’s accounting year ends on December 31.
Instructions
Analyze the five preceding cases individually and determine the
following:
a. The type of adjusting entry needed at year-end (Use the
following codes: A, adjustment of a prepaid expense; B,
adjustment of an unearned revenue; C, adjustment to record an
accrued expense; or D, adjustment to record an accrued
revenue.)
b. The year-end journal entry to adjust the accounts
c. The income statement impact of each adjustment (e.g.,
increases total revenues by $500)
4. Adjusting entries. You have been retained to examine the
records of Mary’s Day Care Center as of December 31, 20X3,
the close of the current reporting period. In the course of your
examination, you discover the following:
· On January 1, 20X3, the Supplies account had a balance of
$1,350. During the year, $5,520 worth of supplies was
purchased, and a balance of $1,620 remained unused on
December 31.
· Unrecorded interest owed to the center totaled $275 as of
December 31.
· All clients pay tuition in advance, and their payments are
credited to the Unearned Tuition Revenue account. The account
was credited for $65,500 on August 31. With the exception of
$15,500 all amounts were for the current semester ending on
December 31.
· Depreciation on the school’s van was $3,000 for the year.
· On August 1, the center began to pay rent in 6-month
installments of $24,000. Mary wrote a check to the owner of the
building and recorded the check in Prepaid Rent, a new account.
· Two salaried employees earn $400 each for a 5-day week. The
employees are paid every Friday, and December 31 falls on a
Thursday.
· Mary’s Day Care paid insurance premiums as follows, each

6. time debiting Prepaid Insurance:
Date Paid
Policy No.
Length of Policy
Amount
Feb. 1, 20X2
1033MCM19
1 year
$540
Jan. 1, 20X3
7952789HP
1 year
912
Aug. 1, 20X3
XQ943675ST
2 years
840
Instructions
The center’s accounts were last adjusted on December 31,
20X2. Prepare the adjusting entries necessary under the accrual
basis of accounting.
5. Bank reconciliation and entries. The following information
was taken from the accounting records of Palmetto Company for
the month of January:
Balance per bank
$6,150
Balance per company records
3,580
Bank service charge for January
20
Deposits in transit
940
Interest on note collected by bank

7. 100
Note collected by bank
1,000
NSF check returned by the bank with the bank statement
650
Outstanding checks
3,080
Instructions:
a. Prepare Palmetto’s January bank reconciliation.
b. Prepare any necessary journal entries for Palmetto.
6. Direct write-off method. Harrisburg Company, which began
business in early 20X7, reported $40,000 of accounts receivable
on the December 31, 20X7, balance sheet. Included in this
amount was $550 for a sale made to Tom Mattingly in July. On
January 4, 20X8, the company learned that Mattingly had filed
for personal bankruptcy. Harrisburg uses the direct write-off
method to account for uncollectibles.
a. Prepare the journal entry needed to write off Mattingly’s
account.
b. Comment on the ability of the direct write-off method to
value receivables on the year-end balance sheet.
7. Allowance method: analysis of receivables. At a January
20X2 meeting, the president of Sonic Sound directed the sales
staff “to move some product this year.” The president noted that
the credit evaluation department was being disbanded because it
had restricted the company’s growth. Credit decisions would
now be made by the sales staff.
By the end of the year, Sonic had generated significant gains in
sales, and the president was very pleased. The following data
were provided by the accounting department:
20X2
20X1

8. Sales
$23,987,000
$8,423,000
Accounts Receivable, 12/31
12,444,000
1,056,000
Allowance for Uncollectible Accounts, 12/31
?
23,000 cr.
The $12,444,000 receivables balance was aged as follows:
Age of Receivable
Amount
Percentage of Accounts Expected to Be Collected
Under 31 days
$4,321,000
99%
31-60 days
4,890,000
90
61-90 days
1,067,000
80
Over 90 days
2,166,000
60
Assume that no accounts were written off during 20X2.
Instructions
a. Estimate the amount of Uncollectible Accounts as of
December 31, 20X2.
b. What is the company’s Uncollectible Accounts expense for
20X2?
c. Compute the net realizable value of Accounts Receivable at
the end of 20X1 and 20X2.

9. d. Compute the net realizable value at the end of 20X1 and
20X2 as a percentage of respective year-end receivables
balances. Analyze your findings and comment on the president’s
decision to close the credit evaluation department.