Unformatted Attachment Preview
Problem 3-3B Preparing adjusting entries, adjusted trial balance, and financial statements A19 P1 P2 P3
Following is the unadjusted trial balance for Alonzo Institute as of December 31, 2017. The Institute provides one-on-one training to individuals who pay tuition directly to the business
and offers extension training to groups in off-site locations. Shown after the trial balance are items a through h that require adjusting entries as of December 31, 2017.
A
B
с
Credit
Debit
$ 60,000
0
70,000
19,000
3.800
12,000
$ 2,500
40,000
ALONZO INSTITUTE
Unadjusted Trial Balance
1
December 31, 2017
2
3 Cash
Accounts receivable
5 Teaching supplies
6 Prepaid insurance
7 Prepaid rent
8 Professional library
9 Accumulated depreciation-Professional library
10 Equipment
11 Accumulated depreciation-Equipment
12 Accounts payable
13 Salaries payable
14 Unearned training fees
15 C. Alonzo, Capital
16 C. Alonzo, Withdrawals
17 Tuition fees earned
18 Training fees earned
19 Depreciation expense Professional library
20 Depreciation expense-Equipment
21 Salaries expense
22 Insurance expense
23 Rent expense
24 Teaching supplies expense
25 Advertising expense
26 Utilities expense
27 Totals
20,000
11 200
0
28.600
71,500
20,000
129,200
68,000
O
0
44,200
0
29,600
0
19,000
13.400
$331 000
$331,000
23 Rent expense
24 Teaching supplies expense
25 Advertising expense
26 Utilities expense
27 Totals
29,600
0
19,000
13,400
$331,000
$331,000
Page 140
Additional Information Items
a. An analysis of the Institute's insurance policies shows that $9.500 of coverage has expired.
b. An inventory count shows that teaching supplies costing $20,000 are available at year-end 2017
c. Annual depreciation on the equipment is $5.000.
d. Annual depreciation on the professional library is $2.400.
e On November 1, the Institute agreed to do a special five-month course (starting immediately) for a client. The contract calls for a $14,300 monthly fee, and the client paid the first two
months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The last two months' fees will be recorded when collected in 2018
1. On October 15, the Institute agreed to teach a four-month class (beginning immediately) to an individual for $2.300 tuition per month payable at the end of the class. The class started
on October 15, but no payment has yet been received. (The Institute's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
g. The Institute's only employee is paid weekly. As of the end of the year, three days' salaries have accrued at the rate of $150 per day.
h. The balance in the Prepaid Rent account represents rent for December
Required
1. Prepare T-accounts representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through) and post them to the T-accounts. Assume that adjusting entries are made only at year-end.
3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.
4. Prepare the company's income statement and statement of owner's equity for the year 2017. and prepare its balance sheet as of December 31, 2017
Check 2ej C. Training Fees Earned, $28,600
318d on Fees
wie balans 1900. Emaine Alonzo, Capital 5105,700
14) Net income
х
W
**
Comparative Analysis A2@ 1
BTN 3-2 Key figures for the recent two years of both Apple and Google follow,
APPLE
GOOGLE
Apple
Current Year Prior Year
Google
Current Year Prior Year
$ millions
$ 53,394
Net income
Net sales
$ 39,510
182.795
$16,348
74,989
$14,136
66,001
233,715
Required
1. Compute profit margins for (a) Apple and (b) Google for the two years of data shown.
2. Which company is more successful on the basis of profit margin? Explain.
-
thic Challenge
C1 C2 A1
Ethics Challenge C1 C2 A1 T
BTN 3-3 Jessica Boland works for Sea Biscuit Co. She and Farah Smith, her manager, are preparing adjuſting entries for annual financial statements. Boland computes depreciation and
records it as
122.000
Depreciation Expense-Equipment
Accumulated Depreciation Equipment
123,000
Smith agrees with her computation but says the credit entry should be directly to the Equipment account. Smith argues that while accumulated depreciation is technically correct, it is less
hassle not to use a contra account and just credit the Equipment account directly. And besides, the balance sheet shows the same amount for total assets under either method."
Required
1. How should depreciation be recorded? Do you support Boland or Smith?
2. Evaluate the strengths and weaknesses of Smith's reasons for preferring her method
3. Indicate whether the situation Boland faces is an ethical problem. Explain.