Answer:
(a) Dr Equity Investments (Trading) $13,200
Cr Cash $13,200
(b) Dr Cash $1,300
Cr Dividend Revenue $1,300
(c) Dr Fair Value Adjustment (Trading) $600
Cr Unrealized Holding Gain or Loss-Income $600
Explanation:
Preparation of Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.
(a) Dr Equity Investments (Trading) $13,200
Cr Cash $13,200
(To record the purchase of the investment)
(b) Dr Cash $1,300
Cr Dividend Revenue $1,300
(400*$3.25 per share)
(To record dividends received)
(c) Dr Fair Value Adjustment (Trading) $600
Cr Unrealized Holding Gain or Loss-Income $600
[(400*$34.50 per share)-$13,200]
(To record the fair value adjustment)
A state's lottery winner is promised $200,000 a year for twenty years (starting at the end of the first year). How much must the state invest now to guarantee the prize if the state can earn annually 7 percent on its funds? How much must the state invest if the annual payments were made at the beginning of the year?
Answer and Explanation:
The computation is shown below:
The amount that should be invested in the case when it earns 7% on its funds is
Investment = pv(7%,20,200000,0,0)
= $2,118,802.85
ANd, the amount that should be invested at the starting of the year is
= pv(7%,20,200000,0,1)
= $2,267,119.05
The same should be considered
Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. It had repaid existing debt to the tune of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250. It paid $233,144 in dividends to its shareholders. What is the net cash provided (used) by financing activities?
Answer:
$28,496
Explanation:
Calculation to determine the net cash provided (used) by financing activities
Cash inflows from financing activities $750,000
Less Cash outflows from financing activities ($721,504)
($425,110 + $63,250 + $233,144)
Net cash flows from financing activities $28,496
($750,000 – $721,504)
Therefore the net cash provided (used) by financing activities is $28,496
Rank the following three stocks by their total risk level, highest to lowest. Night Ryder has an average return of 9 percent and standard deviation of 40 percent. The average return and standard deviation of WholeMart are 10 percent and 22 percent; and of Fruit Fly are 15 percent and 45 percent.
a. Fruit Fly, Night Ryder, WholeMart
b. Night Ryder, WholeMart, Fruit Fly
c. Night Ryder, Fruit Fly, WholeMart
d. WholeMart, Fruit Fly, Night Ryder
Fruit Fly, Night Ryder, WholeMart is the three stocks by their total risk level, highest to lowest. Night Ryder has an average return of 9 percent. Hence, option A is correct.
What is standard deviation?The term "standard deviation" (or "") refers to a measurement of the data's dispersion from the mean. A low standard deviation implies that the data are grouped around the mean, whereas a large standard deviation shows that the data are more dispersed.
Example: How many people had scores on a recent test that were lower than yours, which was 0.5 standard deviations above the mean? 19.1% falls between 0 and 0.5. 50% is less than zero.
A low standard deviation indicates that the data are tightly grouped around the mean, while a high standard deviation indicates that the data are widely dispersed (less dependable) (more reliable).
Thus, option A is correct.
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write a few sentences describing a situation where you (or someone you know) has used their problem solving skill or agility skill to increase their human capital in order to get a better job or earn more income.
Answer:
Increase human capital
Explanation:
In order to increase my own worth, I provide a perspective that others are apprehensive to commit to. This perspective is that of complete honesty, 100% of the time. I own my mistakes, I celebrate my successes and I am humble to the lessons of others and my own.
The capacity to identify, evaluate, comprehend, and effectively solve an issue. It is a set of abilities that includes listening, creativity, innovation, and analytical prowess, among other things. It is a very valuable and difficult skill in the business world.
When employers discuss problem-solving abilities, they frequently refer to the capacity to manage challenging or unforeseen circumstances at work as well as intricate commercial difficulties. Organizations depend on individuals who can objectively evaluate both types of events and calmly pinpoint solutions. These are qualities that give you the ability to achieve it.
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Personal communication systems such as personal networks and grapevines: Spread information hierarchically throughout the organization, from boss to employee and from employee to boss, for example. Contain less accurate information than other organizational communication systems. Contain only a small amount of organizational communications. Spread more information across organizations than formal communication channels such as downward communications.
Answer:
Spread more information across organizations than formal communication channels such as downward communications.
Explanation:
When there is a the personal communication system like the personal networks, and complains so here the more information should be spreaded across the organization as compared to the formal communication like downward communication
So as per the given situation, the last option is correct
During its fiscal year, a Pension Trust Fund buys 1,000 shares of stock, for which it pays $33,000. At year end, the stock has a fair value of $28,000. How should this fact be reported in the Trust Fund's financial statements?a. the investment should be reported at a value of $33,000.
b. the investment should be reported at a value of $33,000, and the loss in market value should be reported in a footnote.
c. the investment should be reported at a value of $30,500.
d. the investment should be reported at a value of $28,000.
Answer: d. the investment should be reported at a value of $28,000.
Explanation:
Investments should be recorded at their fair value in the financial statements. If a loss is made but the company is still holding on to the investment then the loss is unrealized which is the case here.
When there is an unrealized loss, it is to be debited to the Unrealized loss account and credited to the investment account to show that it is reducing. This will then leave the balance of the investment account at the fair value which in this case is $28,000.
(True) or (False)? The most common method companies use is double-declining balance, because it allows companies to recognize for depreciation expense up front.
Answer:
false
Explanation:
my teacher said it was false but she could be wrong
QS 5-6 Perpetual: Inventory costing with weighted average LO P1 A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 350 units. Ending inventory at January 31 totals 150 units. Units Unit Cost Beginning inventory on January 1 320 $ 3.00 Purchase on January 9 80 3.20 Purchase on January 25 100 3.34 Required: Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round your per unit costs to 2 decimal places.)
Answer:
Perpetual Inventory Company
The cost assigned to ending inventory based on the weighted average method is:
= $465 ($3.10 * 150)
Explanation:
a) Data and Calculations:
Units Unit Cost Total Cost
Beginning inventory on January 1 320 $ 3.00 $960
Purchase on January 9 80 3.20 256
Purchase on January 25 100 3.34 334
Total available for sale 500 3.10 $1,550
Sale on January 26 (350) 3.10 1,085
Ending inventory on January 31 150 3.10 465
Use the starting balance sheet and the list of changes to create an updated balance sheet and to answer the question.
Valley Technology Balance Sheet As of December 31, 2020 (amounts in thousands)
Cash 2,200 Liabilities 3,600
Other Assets 2,800 Equity 1,400
Total Assets 5,000 Total Liabilities 5,000
Between January 1 and March 31, 2021:
1. Cash decreases by $200,000
2. Liabilities decrease by $100,000
3. Equity increases by $400,000
What is the value for Other Assets on March 31, 2021?
Answer: $3,300,000
Explanation:
Accounting formula:
Assets = Equity + Liabilities
Total equity and liabilities on March 31 is:
= Beginning balance - decrease in liabilities + Increase in Equity
= 5,000,000 - 100,000 + 400,000
= $5,300,000
Assets therefore has to be $5,300,000 on the same date.
Assets = New cash balance + Other assets
5,300,000 = (2,200,000 - 200,000) + Other assets
Other assets = 5,300,000 - 2,000,000
= $3,300,000
Warehouse operations have shut down at SHXCX Manufacturing suddenly due to a power outage. Warehouse managers are still able to communicate with their home office and their data servers, but unfortunately have no prepared solution to restoring operations. Which of the following controls would be best suited to combat this problem?
a. Validity test
b. Business Continuity Plan (BCP)
c. Disaster Recovery Plan (DRP)
d. Both B and C
Answer:
d. Both B and C
Explanation:
Business continuity planning and disaster recovery planning main goal is the keeping of a business running in the advent or event of an emergency or interruptions.
Business continuity plan (BCP)
This simply shows the important and essential processes, procedures, and personnel that is to be protected in case of an emergency. It uses the business impact analysis (BIA) to evaluate risks to the organization.
Disaster recovery plan (DRP)
This is simply defined as the known steps and procedures personnel in key departments of an organization must follow in any disaster case within the organization.
Business Continuity Planning has its main focus on sustaining operations and protecting the viability of the business following a disaster and it is a long termed focused. While the Disaster Recovery Planning main goal is to minimize the effects of a disaster and to take the necessary steps to ensure that the resources, personnel and business processes are able to resume operations in a timely manner. Its focus is on immediate aftermath of the disaster and it is a Short Term focused.
Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case.
(a) Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates uncollectible receivables of $8,500.
(b) Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of credit sales, which totaled $1,000,000 for the year.
Answer:
a. Credit balance in the Allowance for Doubtful Accounts and already balance in Allowance account = $300
Estimated Doubtful accounts and balance maintained with Allowance for Doubtful Accounts= $8,500
Amount added to the Allowance for Doubtful Accounts = $8,500 - $300
Amount added to the Allowance for Doubtful Accounts = $8,200
Ending balance maintained with Allowance for Doubtful Accounts = $8,500
b. Credit balance in the Allowance for Doubtful Accounts and already balance in Allowance account = $500
Estimated Doubtful accounts and balance maintained with Allowance for Doubtful Accounts = $1,000,000 * 2% = $20,000
Ending balance maintained with Allowance for Doubtful Accounts = $20,000 + $500 = $20,500
Problem 9-1 Comparing Renting and Buying [LO9-2] Rental Costs Buying Costs Annual rent $ 7,380 Annual mortgage payments $ 9,800 ($9,575 is interest) Insurance 145 Property taxes 1,780 Security deposit 650 Insurance/maintenance 1,050 Down payment/closing costs 4,500 Growth in equity 225 Estimated annual appreciation 1,700 Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent. (a) Calculate the total rental cost and total buying cost. (Round your intermediate calculations and final answers to the nearest whole number.) (b) Based on the cost criteria, would you recommend buying or renting
Answer:
Computation of Rental Costs
Particulars Amount
Rent $7,380
Insurance $145
Loss of Interest on Security Deposit $39 ($650*6%)
Total Rental Costs $7,564
Computation of Buying Costs
Particulars Amount
Annual Mortgage Payments $9,800
Taxes, Insurance and Maintenance $2,830 ($1,050+$1,780)
Loss of Interest on Down Payment $270 (4,500*6%)
Growth in Equity -$225
Annual Appreciation -$1,700
Mortgage Interest Tax Savings -$2,681 (9,575*28%)
Tax Savings from Property Taxes -$498 (1,780*28%)
Total Buying Costs $7,796
b. Based on the cost criteria, i would recommend renting as it results in lesser cost
Beginning inventory Merchandise $ 275,000 Finished goods $ 450,000 Cost of purchases 500,000 Cost of goods manufactured 900,000 Ending inventory Merchandise 115,000 Finished goods 375,000 Compute cost of goods sold for each of these two companies for the year.
Answer:
Results are below.
Explanation:
Giving the following information:
Company 1:
Beginning inventory Merchandise $ 275,000
Cost of purchases 500,000
Ending inventory Merchandise 115,000
Company 2:
Cost of goods manufactured 900,000
Ending Finished goods 375,000
Beginning Finished goods $ 450,000
To calculate the cost of goods sold, we need to use the following formula:
COGS= beginning finished inventory + cost of goods manufactured/purchased - ending finished inventory
Company 1:
COGS= 275,000 + 500,000 - 115,000
COGS= $660,000
Company 2:
COGS= 900,000 + 375,000 - 450,000
COGS= $825,000
High-Low Method The manufacturing costs of Rosenthal Industries for the first three months of the year follow:
Total Costs Production
January $228,780 1,860 units
February 245,560 3,410
March 355,880 4,960
Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.
Answer:
a. Variable cost per unit = High cost - Low cost / High volume - Low volume
Variable cost per unit = $355,880 - $228,780 / 4,960 - 1,860
Variable cost per unit = $127,100 / 3,100
Variable cost per unit = $41
b. Total cost = Fixed cost + Variable cost
$228,780 = Fixed cost + (1,860 * $41)
$228,780 = Fixed cost + $76,260
Fixed cost = $228,780 - $76,260
Fixed cost = $152,520
Question 3
Rank the following assets of a commercial bank in order of decreasing liquidity.
(a) Market loans
(b) Reserves with the Bank of Ghana
(c) Cash
(d) Personal loans
(e) Sale and repurchase agreements (repos)
(f) Mortgages
(g) Government bonds (of from one to five years to maturity)
Answer:
Reserves with the Bank of Ghana
Explanation:
I could be wrong let me know if its correct or incorrect
You are the regional sales manager for Standard Publishing Co. The company is preparing adjusting entries for the year ended March 31, 2021. On September 1, 2020, customers in your region paid $180,000 cash for three-year magazine subscriptions beginning on that date. The magazines are published and mailed to customers monthly. These were the only subscription sales in your region during the year. What amount should be reported on the income statement for subscription revenue for the year ended March 31, 2021
Answer:
Standard Publishing Co.
The amount of subscription revenue that should be reported on the income statement for the year ended March 31, 2021 is:
= $35,000.
Explanation:
a) Data and Calculations:
September 1, 2020 Cash receipt for magazine subscriptions for three years = $180,000
This subscriptions is equal to 36 months subscription.
The amount of subscription revenue to report for the year ended March 31, 2021 = $35,000 ($180,000 * 7/36).
From the above calculation, a month's subscription revenue = $5,000 ($180,000/36)
Therefore, seven months' subscription from September 1, 2020 to March 31, 2020 = $35,000 ($5,000 * 7).
The unearned subscription revenue is debited with $35,000, while earned subscription revenue is credited with the same amount.
Grays Company has inventory of 25 units at a cost of $6 each on August 1. On August 3, it purchased 35 units at $11 each. 27 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 27 units that were sold?
Answer:
$174
Explanation:
Calculation to determine what amount will be reported as cost of goods sold for the 27 units that were sold
Cost of goods sold=(25 units*$6) + [(25 units -27units)*$12]
Cost of goods sold =$150+$24
Cost of goods sold=$174
Therefore the amount that will be reported as cost of goods sold for the 27 units that were sold is $174
Adonis Corporation issued 10-year, 11% bonds with a par value of $300,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adonis received $318,696 in cash proceeds. Which of the following statements is true?
a. Adonis must pay $300,000 at maturity plus 20 interest payments of $16,500 each.
b. Adonis must pay $300,000 at maturity and no interest payments.
c. Adonis must pay $318,696 at maturity plus 20 interest payments of $16,500 each.
d. Adonis must pay $300,000 at maturity plus 20 interest payments of $15,000 each.
e. Adonis must pay $318,696 at maturity and no interest payments.
Answer:
a. Adonis must pay $300,000 at maturity plus 20 interest payments of $16,500 each
Explanation:
It should be noted that at maturity bond issuers usually pay back the face value of the bond to bondholders except where they also pay a premium of the face value which is not the case here, hence, the face value of $300,000 would be repaid at maturity.
There would 20 semiannual coupon payments in 10 years bond tenor and the value of each semiannual coupon is computed thus:
semiannual coupon=face value*coupon rate/2
coupon rate=11%(11% bonds means that coupon rate is 11%)
semiannual coupon=$300,000*11%/2
semiannual coupon=$16,500
In a slow year, Deutsche Burgers will produce 2.8 million hamburgers at a total cost of $3.4 million. In a good year, it can produce 4.8 million hamburgers at a total cost of $4.6 million.a. What are the fixed costs of hamburger production
Answer:
the fixed cost is $1.72 million
Explanation:
The computation of the fixed cost is shown below:
= Total cost - variable cost
= $3.4 million - ($4.6 million - $3.4 million) ÷ $3.4 million - $.1.2 million ÷ $2 million
= $3.4 million - 2.8 million × $0.60 million
= $1.72 million
Hence, the fixed cost is $1.72 million
a)What are the expected returns and standard deviations of a portfolio consisting of:1.100 percent in stock A
Answer:
12%
1.00
Explanation:
Note that the expected return on stock A which is 12% is missing from the question as well as the standard deviation of A which is 1.00
The expected return from stock A with 100% of funds(total amount of investment) invested in stock A is the percentage invested in A multiplied by the expected return of stock A shown thus:
expected return=100%*12%
portfolio expected return=12%
portfolio standard deviation(if 100% invested in A)=1.00*100%
what is the meaning of want
Answer:
Want is to desire something or to yearn. (EX. I want an ice cream.) Want is showing that you would like something basically
Explanation:
Jose could not find his log book that proved his vehicle expenses for 2018. Therefore, he did not deduct this expense on his timely-filed 2018 return. What is the latest date he can file an amended return, corrected for his unclaimed expenses, to obtain a refund of taxes paid on his 2018 return?A. April 18, 2018.B. April 17, 2019.C. October 15, 2019.D. April 15, 2021.
Answer: April 15, 2022
Explanation:
The limit on issuing cash refunds is three years which means that Jose would have to file the amended return within three years if he hopes to obtain a refund on the taxes he paid in 2018.
The deadline to file returns for 2018 is April 15, 2019 so if the deadline is 3 years from then, the latest date would be:
= 2019 + 3
= 2022
= April 15, 2022
Options presented might be for variant of question.
Which of the following statements are true regarding externalities? (Check all that apply.) A. Deadweight loss can be either a foregone benefit or the total cost of the externality to society. B. In the case of an externality, the free market will maximize social surplus. C. For computing efficient outcomes, economic agents adjust the demand curve to account for negative externalities. D. A negative externality occurs when an economic activity has a spillover cost to a bystander.
Answer:
d
Explanation:
A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.
A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation. Taxation increases the cost of production and therefore discourages overproduction. Tax levied on externality is known as Pigouvian tax.
Government can regulate the amount of externality produced by placing an upper limit on the amount of negative externality permissible
Coase theorem has been proposed as a solution to externality. According to this theory, when there are conflicting property rights, bargaining between parties involved can lead to an efficient outcome only if the bargaining cost is low
Another solution to negative externality is through the activities of charities. Charities can raise donations to limit or regulate the activities of firms that constitutes a negative externality.
When an economic action has a spillover cost to a bystander, this is referred to as a negative externality.
What are positive and negative externalities?Positive Externalities:
If the advantages to third parties who are not involved in the production process exceed the cost, the good has positive externality.
Research and development is an example of a positive externality-generating activity. They are frequently under-produced due to the high expense of R & D.
Subsidies can be used by the government to support the production of activities that create positive externality.
Negative Externalities:
If the costs to non-production parties are larger than the benefits, a good has negative externality.
Pollution is an example of a negative externality-producing activity. Because pollution may be created for little or no cost, it is frequently overproduced.
Taxation can be used by the government to discourage the production of activities that cause negative externalities.
Negative externalities like as air and noise pollution are frequently mentioned. Therefore, option (d) is true regarding the externalities.
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Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below: Selling price per unit $ 24 Variable expense per unit $ 18 Fixed expense per month $ 4,800 Unit sales per month 950 Required: 1. What is the company’s margin of safety? (Do not round intermediate calculations.) 2. What is the company’s margin of safety as a percentage of its sales?
Answer:
1.150 units
2. 15.79%
Explanation:
Margin of safety is the difference between the current level of profitability and the break-even level. In other words, it is excess of the current level of sales and the break-even sales computed using the formula below:
the margin of safety in units=current level of sales-breakeven sales
break-even sales=fixed expense/contribution margin
fixed expense=$4,800
contribution margin per unit=selling price-variable cost
contribution margin per unit=$24-$18
contribution margin per unit=$6
break-even sales=$4,800/$6
break-even sales units=800 units
the margin of safety in units=950-800
the margin of safety in units=150 units
the margin of safety as a percentage of its sales=150/950
the margin of safety as a percentage of its sales=15.79%
Suppose that a competitive firm's marginal cost of producing output q (MC) is given by MC (q )equals6plus2 q. Assume that the market price (P) of the firm's product is $18 . What level of output (q) will the firm produce? The firm will produce nothing units of output. (Enter your response rounded to two decimal places.)
Answer:
The firm will produce 6.00 units of output.
Explanation:
From the question, we have:
MC(q) = 6 + 2q ……………… (1)
P = $18 ………………………. (2)
For any firm, profit is maximized when MC = P. To determine the level of output (q) the firm will produce, we therefore equate equations (1) and (2) and solve for q as follows:
6 + 2q = 18
2q = 18 - 6
2q = 12
q = 12 / 2
q = 6.00
Therefore, the firm will produce 6.00 units of output.
Suppose you borrow $9,875 and then repay the loan by making 12 monthly payments of $863.58 each. What is the effective annual rate (EAR) you are paying
Answer:
9.38%
Explanation:
PV = $9,875
PMT = $863.58
NPER = 12
Using the MS Rate Function to derive the Periodic rate
Periodic rate = Rate(NPER, -PMT, PV)
Periodic rate = Rate(12, -863.58, 9,875)
Periodic rate = 0.0075
Periodic rate = 0.75%
Nominal rate = Periodic rate * NPER
Nominal rate = 0.75% * 12
Nominal rate = 9%
Using the MS Effect Function to derive the effective annual rate (EAR)
Nominal rate = 9%
NPER = 12
Effective annual rate (EAR) = Effect(Nominal rate, NPER)
Effective annual rate (EAR) = Effect(9%, 12)
Effective annual rate (EAR) = 0.0938
Effective annual rate (EAR) = 9.38%
So, the the effective annual rate (EAR) you are paying is 9.38%.
Suppose you buy some stock in the Alpha Corporation at a price of $45.95 per share. 410 days later you sell the stock for $48.27. During this period you received a per share dividend of $1.20. What is your annualized return on this investment
Answer: 6.79%
Explanation:
The holding period return is:
= (Current price - Cost price + Dividend) / Cost price
= (48.27 - 45.95 + 1.20) / 45.95
= 7.66%
The annualized return is:
= ( ( 1 + holding period return) ^ number of days in a year/ number of days stock was held - 1)
= ( ( 1 + 7.66%) ³⁶⁵ / ⁴¹⁰ - 1)
= 6.79%
how success and failure in practice of management affect organization?
Explanation:
One of the most remarkable aspects of organizational change efforts is their low success rate. There is substantial evidence that some 70% of all change initiatives fail. This article explores the argument that a potentially significant reason for this is a lack of alignment between the value system of the change intervention and of those members of an organization undergoing the change. In order to test this assertion, the article begins by reviewing the change literature with regard to the impact of values on success and failure. It then examines Graves' Emergent Cyclical Levels of Existence Theory and uses this as the basis of a method for identifying and aligning value systems. The article then presents the results from case studies of two change initiatives in different organizations. These support both the method and the assertion that value system alignment may be an important factor in the success of organizational change initiatives. The article concludes with recommendations for further research.
Firm A wants to enter a foreign market and has a skill that is difficult to duplicate. Firm B desires this skill, so Firm A works with Firm B in an arrangement known as a joint venture.
a. True
b. False
Firm A enters a foreign market and partners with Firm B in a joint venture, leveraging its unique skill that is difficult to replicate. This arrangement allows both firms to benefit from their collaboration and access new market opportunities. Therefore, the given statement is true.
Collaboration is a cooperative and interactive process where individuals or groups work together towards a shared goal or objective. It involves open communication, mutual respect, and a willingness to actively contribute and listen to others' ideas and perspectives.
Collaborative efforts often involve pooling resources, expertise, and skills to achieve a desired outcome. It requires effective teamwork, coordination, and the ability to leverage diverse strengths and viewpoints.
Collaboration promotes collective problem-solving, creativity, and innovation, fostering a supportive and inclusive environment where individuals can contribute their unique insights and work synergistically towards a common purpose.
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Wildhorse Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2022.
1. Purchased a 1-year insurance policy on June 1 for $2,220 cash.
2. Paid $7,020 on August 31 for 5 months’ rent in advance.
3. On September 4, received $3,960 cash in advance from a corporation to sponsor a game each month for a total of 9 months for the most improved students at a local school.
4. Signed a contract for cleaning services starting December 1 for $1,080 per month. Paid for the first 2 months on November 30. (Hint: Use the account Prepaid Cleaning to record prepayments.)
5. On December 5, received $1,620 in advance from a gaming club. Determined that on December 31, $515 of these games had not yet been played.
Question Completion:
Prepare the necessary journal entries.
Answer:
Wildhorse Games Inc.
1. June 1: Debit Prepaid Insurance $2,220
Credit Cash $2,220
To record the payment for 1-year insurance policy.
2. August 31: Debit Prepaid Rent $7,020
Credit Cash $7,020
To record the payment for 5 months’ rent in advance.
3. September 4: Debit Cash $3,960
Credit Unearned Game Revenue $3,960
To record cash received in advance to sponsor a game each month for a total of 9 months.
4. November 30: Debit Prepaid Cleaning $2,16
Credit Cash $2,160
To record the payment for cleaning services for two months.
5. December 5: Debit Cash $1,620
Credit Unearned Games Revenue $1,620
Adjustments on December 31:
1. Debit Insurance Expense $1,295
Credit Prepaid Insurance $1,295
To record insurance expense for the period ($2,220 * 7/12).
2. Debit Rent Expense $5,616
Credit Prepaid Rent $5,616
To record rent expense for the period ($7,020 * 4/5).
3. Debit Unearned Games Revenue $1,760
Credit Earned Games Revenue $1,760
To record earned revenue ($3,960 * 4/9).
4. Debit Cleaning Expense $1,080
Credit Prepaid Cleaning $1,080
To record cleaning expense for the period.
5. Debit Unearned Games Revenue $1,105
Credit Earned Games Revenue $1,105
To record earned revenue.
Explanation:
a) Data and Analysis:
1. June 1: Prepaid Insurance $2,220 Cash $2,220 1-year insurance policy
2. August 31: Prepaid Rent $7,020 Cash $7,020 for 5 months’ rent in advance.
3. September 4: Cash $3,960 Unearned Game Revenue $3,960 to sponsor a game each month for a total of 9 months
4. November 30: Prepaid Cleaning $2,160 Cash $2,160
$1,080 per month. Paid for the first 2 months on November 30.
5. December 5: Cash $1,620 Unearned Games Revenue $1,620
Adjustments on December 31:
1. Insurance Expense $1,295 Prepaid Insurance $1,295 ($2,220 * 7/12)
2. Rent Expense $5,616 Prepaid Rent $5,616 ($7,020 * 4/5)
3. Unearned Games Revenue $1,760 Earned Games Revenue $1,760 ($3,960 * 4/9)
4. Cleaning Expense $1,080 Prepaid Cleaning $1,080
5. Unearned Games Revenue $1,105 Earned Games Revenue $1,105
