29 Jun Question 1. In analyzing the accounts of
Question
1. In analyzing the accounts of Porsha Corporation, the adjusting data listed below are determined on December 31, the end of an annual fiscal period.
a) The prepaid insurance account shows a debit of $4,800, representing the cost of a 2-year fire insurance policy purchased and dated July 1. Therefore, the insurance policy needs to be adjusted to show the amount of insurance that still “prepaid” at the end of the year.
b) On September 1, Rent Revenue was credited for $5,750, representing revenue from subrental for a 5-month period beginning on that date. At the end of the year, the 5 month contract has not been fulfilled. The adjustment needs to correct the amount of revenue actually earned during the year.
c) Purchase of advertising materials for $2,475 during the year was recorded in the advertising expense account. On December 31, advertising materials costing $475 are on hand. Adjust the expense and prepaid amount to show the actual amount on hand.
d) On November 1, $3,000 was paid for rent for a 5-month period beginning on that date. 2 months have been used as of the end of the year.
e) Miscellaneous Office Expense was debited for office supplies of $1,350 purchased during the year. On December 31, office supplies of $250 are on hand. Adjust the expense and prepaid amount to show the actual amount on hand.
a) The prepaid insurance account shows a debit of $4,800, representing the cost of a 2-year fire insurance policy purchased and dated July 1. Therefore, the insurance policy needs to be adjusted to show the amount of insurance that still “prepaid” at th
Required:
Give the adjusting entry for each item above.
2. The following information relates to ending balances of Stardust Company at the end of 2014:
2014
Accounts Payable 89,000
Accounts Receivable 64,500
Accumulated Depreciation – Buildings 57,000
Allowance for Bad Debts 4,000
Bad Debt Expense 2,800
Buildings 119,000
Capital Stock 300,000
Cash 44,000
Cost of Goods Sold 680,000
Depreciation Expense 12,000
Discontinued operations (loss from disposal) 40,000
Extraordinary Gain 34,000
Income Tax Expense 12,000
Insurance Expense 16,000
Interest Expense 19,500
Interest Payable 30,000
Intangible Assets 97,000
Inventory 245,000
Land 180,000
Long-term Investments 75,000
Mortgage Payable 210,000
Office Expenses 34,000
Prepaid Insurance 3,400
Retained Earnings (at end of year) 136,250
Salaries Expense 99,000
Sales 950,000
Sales Returns 24,500
Selling Expenses 49,000
Selling Expenses Payable 1,650
Supplies Expense 38,500
Tax Expense – Real Estate & Payroll 16,000
Number shares outstanding at end of year 4,200
Market value per share at end of year $16.50
1. Prepare a classified balance sheet for Stardust Company for 2014.
2. Prepare a multiple-step income statement for Stardust Company for 2014.
3. Prepare the following calculations (show your work):
A. Current ratio
B. Debt ratio
C. Return on assets
D. Return on equity
E. Earnings per share
F. Price-earnings ratio
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