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    Problem I Adjusting Entries

    The following account balances were taken from the trial balance of the Sno-Top Ski Resort on December 31, 2010. For the month ended December 31, 2010, make the necessary adjusting entries using the account balances along with the added information supplied below. (Assume normal DR or CR balances.)
    Prepaid Insurance $4,080
    Office Supplies 700
    Storage Revenues 6,000
    Salaries Expense 203,900
    Ski lifts 325,000
    Accumulated Depr. - lifts 73,000
    Note payable (12%, due in 7 months) 450,000

    1. Monthly insurance expense amounts to $4000.

    2. One-third of the storage revenue fees collected was for ski storage during the next year.

    3. Employees have earned $5000 for working in December but will not be paid until January.

    4. A physical inventory determined that $150 of the office supplies were still on hand.

    5. Depreciation on the ski lifts for the month amounts to $8,000.

    6. At month-end they did not pay the monthly interest owed on their note payable.

    2. ABC Company finally decides to sell its buggy whip manufacturing division in 2006. Its operating loss for 2006 for the division is $120,000 and at December 31 2006 believes that it will have to sell the division at a loss of $100,000. However, it does not enter into an agreement to sell until March of 2007, after the 2006 financial statements are released. The final sales agreement causes ABC Company to sell the division at a loss of $80,000. The operating loss for the buggy whip division prior to disposal in 2007 is $50,000. ABC has a 40% tax rate.

    Show in good form how ABC would report these events for the disposal in their 2007 comparative income statement (i.e. for both 2006 & 2007). (Ignore EPS disclosures)

    Problem III
    The adjusted trial balance for Chai Tea Company at December 31, 2010 is presented below:
    Debit Credit
    Cash 10,500
    Accounts receivable 130,000
    Allowance for uncollectible accounts 10,000
    Prepaid rent 5,000
    Inventory 25,000
    Equipment 300,000
    Accumulated depreciation-equipment 125,000
    Accounts payable 20,000
    Notes payable - due in three months 30,000
    Salaries payable 4,000
    Interest payable 1,000
    Common stock 200,000
    Retained earnings 50,000
    Dividends 20,000
    Sales revenue 400,000
    Costs of goods sold 180,000
    Salaries expense 120,000
    Rent expense 15,000
    Depreciation expense 30,000
    Interest expense 2,000
    Bad debt expense 2,500 _______
    Totals $840,000 $840,000

    Required: Prepare the closing entries for Chai Tea Company for the year 2010.

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    Problem I Adjusting Entries

    The following account balances were taken from the trial balance of the Sno-Top Ski Resort on December 31, 2010. For the month ended December 31, 2010, make the necessary adjusting entries using the account balances along with the added information supplied below. (Assume normal DR or CR balances.)
    Prepaid Insurance $4,080
    Office Supplies 700
    Storage Revenues 6,000
    Salaries Expense 203,900
    Ski lifts 325,000
    Accumulated Depr. - lifts 73,000
    Note payable (12%, due in 7 months) 450,000

    1. Monthly insurance expense amounts to $4000.

    2. One-third of the storage revenue fees collected was for ski storage during the next year.

    3. Employees have earned $5000 for working in December but will not be paid until January.

    4. A physical inventory determined that $150 of the office supplies were still on hand.

    5. Depreciation on the ski lifts for the month amounts to $8,000.

    6. At month-end they did not pay the monthly interest owed on their note payable.

    2. ABC Company finally decides to sell its buggy whip manufacturing division in 2006. Its operating loss for 2006 for the division is $120,000 and at December 31 2006 believes that it will have to sell the division at a loss of $100,000. However, it does not enter into an agreement to sell until March of 2007, after the 2006 financial statements are released. The final sales agreement causes ABC Company to sell the division at a loss of $80,000. The operating loss for the buggy whip division prior to disposal in 2007 is $50,000. ABC has a 40% tax rate.

    Show in good form how ABC would report these events for the disposal in their 2007 comparative income statement (i.e. for both 2006 & 2007). (Ignore EPS disclosures)

    Problem III
    The adjusted trial balance for Chai Tea Company at December 31, 2010 is presented below:
    Debit Credit
    Cash 10,500
    Accounts receivable 130,000
    Allowance for uncollectible accounts 10,000
    Prepaid rent 5,000
    Inventory 25,000
    Equipment 300,000
    Accumulated depreciation-equipment 125,000
    Accounts payable 20,000
    Notes payable - due in three months 30,000
    Salaries payable 4,000
    Interest payable 1,000
    Common stock 200,000
    Retained earnings 50,000
    Dividends 20,000
    Sales revenue 400,000
    Costs of goods sold 180,000
    Salaries expense 120,000
    Rent expense 15,000
    Depreciation expense 30,000
    Interest expense 2,000
    Bad debt expense 2,500 _______
    Totals $840,000 $840,000

    Required: Prepare the closing entries for Chai Tea Company for the year 2010.

    $2.49

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