GL0302 - Based on Problem 3-3A LO P1, P2, P3, P4, P5, P6 Strods Technical Institute (STI), a school owned by Anita Strods, provides training to individuals who pay tuition directly to the school. STI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2018, is found on the trial balance tab. STI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31 follow. a. An analysis of STI's insurance policies shows that $2,900 of coverage has expired. b. An inventory count shows that teaching supplies costing $3,920 are available at year-end. c. Annual depreciation on the equipment is $4,000. d. Annual depreciation on the professional library is $7,400. e. On November 1, STI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $3,000, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. f. On October 15, STI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $7,500 of the tuition has been earned by STI. g. STI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $160 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet Impact on income For transactions a-h, review the unadjusted balance and prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred. Each adjustment is posted automatically to the general ledger and trial balance as soon as you click "record entry".
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Akash M.
The following adjusted revenue and expense accounts appeared in the accounting records of Pashi, Inc., an accrual basis taxpayer, for the year ended December 31, Year 2. Revenues Net sales: $3,000,000 Interest: $18,000 Gains on sales of stock: $5,000 Key-man life insurance proceeds: $100,000 Subtotal: $3,123,000 Costs and Expenses Cost of goods sold: $2,000,000 Salaries and wages: $500,000 Bad debt expense: $13,000 Taxes, other than federal income: $62,000 Interest: $12,000 Contributions: $5,000 Depreciation: $60,000 Other: $40,000 Federal income taxes: $120,000 Subtotal: $2,812,000 Net Income: $311,000 The following additional information is provided: 1. Interest revenue consists of: Corporate bonds: $15,000 Municipal bonds: $3,000 2. Gains on sales of stock consist of the following unrelated corporations: Ral Corp. (bought in May Year 1, sold in June Year 2): $1,000 Blu, Inc. (bought in November Year 1, sold in September Year 2): $4,000 3. Pashi, Inc. owned the key-man life insurance policy, paid the premiums, and was the direct beneficiary. The proceeds were collected on the death of the corporation's treasurer. 4. Bad debt expense represents a reasonable addition to Pashi, Inc.'s allowance for uncollectible accounts, under the method consistently used. Actual accounts written off in Year 2 amounted to $4,000. 5. Taxes, other than federal income, consist of: Payroll taxes: $40,000 Property taxes: $20,000 Penalty for late payment of taxes: $2,000 6. Interest expense consists of $11,000 interest on funds borrowed for working capital and $1,000 interest on funds borrowed to buy the municipal bonds. 7. Contributions were all paid in Year 2 to State University, specifically designated for the purchase of laboratory equipment. 8. Depreciation per books is straight-line. For tax purposes, depreciation amounted to $85,000. 9. Other expenses include premiums of $5,000 on the key-man life insurance policy covering the treasurer, who died in December Year 2. 10. Federal income tax paid in Year 2 amounted to $105,000. The difference between the income tax provision and income tax paid is the result of temporary differences. In the associated cells in column C, enter the appropriate amount for the item you selected in column B. Note that not all areas of the M-1 form are presented here.
Preparing Adjusting Entries Prepare adjusting journal entries for the year ended December 31 for each separate situation. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies; Prepaid Insurance; Prepaid Rent; Equipment; Accumulated Depreciation-Equipment; Wages Payable; Unearned Revenue; Services Revenue; Wages Expense; Supplies Expense; Insurance Expense; Rent Expense; and Depreciation Expense-Equipment. a. Depreciation on the company's equipment for the year is computed to be $18,000. b. The Prepaid Insurance account had a $6,000 debit balance at December 31 before adjusting for the costs of any expired coverage. An analysis of the company's insurance policies showed that $1,100 of unexpired insurance coverage remains. c. The Supplies account had a $700 debit balance at the beginning of the year, and $3,480 of supplies were purchased during the year. The December 31 physical count showed $300 of supplies available. d. Two-thirds of the work related to $15,000 of cash received in advance was performed this period. e. The Prepaid Rent account had a $6,800 debit balance at December 31 before adjusting for the costs of expired prepaid rent. An analysis of the rental agreement showed that $5,800 of prepaid rent had expired. Check: c) Dr. Supplies Expense, $3,880 e) Dr. Rent Expense, $5,800 Wage expenses of $3,200 have been incurred but are not paid as of December 31.
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