Harriets Hats Essay

1. A year-end physical count of office supplies on hand reveals supplies worth $1,800. The balance sheet reflected a balance in the office supplies account of $3,700 before any year-end adjustments were made. What is the amount of supplies expense that will be included on the current year income statement? 2. On December 1, 20Y1, Nelson collected rent of $7,200 (for December, January, and February rent) from a tenant renting some space in its warehouse and credited Unearned Rent Revenue for the entire amount. What is the balance sheet value of Unearned Rent Revenue on 12/31/Y1? 3. On July 31, 20Y1, Smith Company paid $10,200 to rent warehouse space for the period 7/31/Y1 to 7/31/Y2. This warehouse space was also rented from 7/31/Y0 to 7/31/Y1. Smith’s 1/1/Y1 balance sheet reflected a balance in the Prepaid Rent account relating to this warehouse of $5,775. Determine the amount of rent expense that would appear on Smith’s 20Y1 income statement. EXAM 1 REVIEW | PAGE 1 Reporting Special Income Items Plush Textiles had a beginning balance in its retained earnings account of $580,000 on January 1, 20Y1. Income from Continuing Operations (before-tax) was $225,000 for 20Y1. The company’s tax rate is 30% for all years presented. Following is a list of special items that have not been considered in the amounts above. All amounts are before taxes: Extraordinary gain Correction of a 20Y0 revenue understatement Loss from operations of a discontinued textiles division Gain on sale of the textiles division Omission of depreciation charges from January and February 20Y1 $31,000 $50,000 $22,000 $60,000 $10,000 Prepare a partial income statement for 20Y1 starting with Income From Continuing Operations before Taxes. What is the 12/31/Y1 balance in the Retained Earnings account? Change in Accounting Principle Tom Zuluaga Company began operations in 20Y1. In 20Y1 and 20Y2, the company estimated its bad debt expense by using the percentage of credit sales method. During 20Y3, the company’s management decided to change to the aging-ofreceivables method for determining bad debt expense. Yearly bad debt expense using the two methods is presented below. Tom Zuluaga has a 35% tax rate. 20Y1 20Y2 20Y3 % of Credit Sales $450,000 $300,000 $320,000 Aging-of-Receivables $380,000 $270,000 $290,000 How much bad debt expense will be reported on the 20Y3 Income Statement? What is the dollar value (if any) of the 20Y3 adjustment to the beginning balance of Retained Earnings to reflect this change in accounting principle? Debit Credit What Balance Sheet account other than Taxes Payable and Retained Earnings needs to be adjusted in 20Y3? By how much? Account Change in Accounting Estimate $Â  Debit Credit Tom Zuluaga Company placed an asset in service on January 2, 20Y1. Its cost was $1,350,000 with an estimated service life of 6 years. Salvage value was estimated to be $90,000. During 20Y3 the company’s management determined, due to technological obsolescence, the asset’s remaining useful life is 2 years, and the salvage value is estimated to be $45,000. The company uses the straight-line method of depreciation. Assume a 35% tax rate. How much depreciation expense will be reported on the 20Y3 Income Statement? How much depreciation expense will be reported as an adjustment to the beginning balance of Retained Earnings? $Â  Debit Long-Term Contracts On July 1, 20Y1, Tribe Construction Company Inc. contracted to build an office building for Moser Corp. for a total contract price of $2,500,000. On July 1, Tribe Construction estimated that it would take between 3 and 4 years to complete the building. On December 31, 20Y4, the building was completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Moser for 20Y1 – 20Y4. Contract costs incurred to date Estimated costs to complete the contract Billings to Moser to date Collections to date At 12/31/Y1 $ 250,000 1,750,000 325,000 200,000 At 12/31/Y2 $ 1,300,000 1,100,000 2,000,000 1,800,000 At 12/31/Y3 $ 1,800,000 750,000 2,300,000 2,000,000 At 12/31/Y4 $ 2,650,000 -02,500,000 2,500,000 Complete the following information regarding the amount of profit/loss Tribe will recognize each year of the contract: At 12/31/YI At 12/31/Y2 At 12/31/Y3 At 12/31/Y4 Percent Complete Method Completed Contract Method Prepare a 12/31/Y2 partial balance sheet related to the above contract, assuming Tribe uses the percentage of completion method.