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Timlin Company and Tolbert Corporation

ADJUSTING ENTRIES (15 points)
The trial balance of Timlin Company shows the following balances for selected accounts on November 30, 2008:
Prepaid Insurance $12,000 Unearned Revenue $ 4,800
Equipment 60,000 Notes Payable 30,000
Accumulated Depreciation 6,600 Interest Payable 450

Instructions: Using the additional information given below, prepare the appropriate monthly adjusting entries at November 30. Show computations.

A. Revenue for services rendered to customers, but not yet billed, totaled $6,000 on November 30.

B. The note payable is a 9%, 1 year note issued September 1, 2008.

C. The equipment was purchased on January 2, 2007, for $60,000. It has an estimated life of 10 years and an estimated salvage value of $6,000. Timlin uses the straight-line depreciation method.

D. An insurance policy was acquired on June 30, 2008; the premium paid for 2 years was $14,400.

E. Timlin received $4,800 fees in advance from a customer on November 1, 2008. Three-fourths of this amount was earned by November 30.

STATEMENT OF CASH FLOWS (15 points)
Presented below is information related to the operations of Tolbert Corporation.
December
2008 2007 2008
Cash $120,000 $ 80,000 Sales $760,000
Accounts receivable 110,000 96,000 Cost of goods sold 380,000
Inventory 60,000 44,000 Gross profit 380,000
Prepaid expenses 30,000 40,000 Depreciation expense 28,000
Land 78,000 40,000 Other operating expenses 266,000
Building 200,000 200,000 Income from operations 86,000
Accumulated depreciation- Loss on equipment sale 6,000
building (34,000) (16,000) Income before income taxes 80,000
Equipment 116,000 160,000 Income tax expense 24,000
Accumulated depreciation- Net income $ 56,000
equipment (30,000) (40,000)
Total $650,000 $604,000

Accounts payable $ 80,000 $ 58,000
Bonds payable 0 200,000
Common stock 400,000 200,000
Retained earnings 170,000 146,000
Total $650,000 $604,000

Additional information:
(a) In 2008, Tolbert declared and paid a cash dividend.
(b) The company converted $200,000 of bonds into common stock.
(c) Equipment with a cost of $44,000 and a book value of $24,000 was sold for $18,000. Land was acquired for cash.

Instructions:
Prepare a statement of cash flows in proper form for 2008, using the indirect method.

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ADJUSTING ENTRIES (15 points)
The trial balance of Timlin Company shows the following balances for selected accounts on November 30, 2008:
Prepaid Insurance $12,000 Unearned Revenue $ 4,800
Equipment 60,000 Notes Payable 30,000
Accumulated Depreciation 6,600 Interest Payable 450

Instructions: Using the additional information given below, prepare the appropriate monthly adjusting entries at November 30. Show computations.

A. Revenue for services rendered to customers, but not yet billed, totaled $6,000 on November 30.
Accounts Receivable 6,000
Revenue 6,000

B. The note payable is a 9%, 1 year note issued September 1, 2008.
Interest Expense 225
...

Solution Summary

This solution is comprised of a detailed explanation to prepare the appropriate monthly adjusting entries at November 30.

$2.19