Andrew Peller Ltd. is a leading producer and marketer of quality wines in Canada. Selected information from the company’s financial statements for the year ended March 31, 2012, is provided below (in thousands of dollars):
1. Compute the amount of cash collected from customers during the year. Assume that all sales for fiscal year 2012 were on credit.
2. Prepayments represent the net amount of a number of accounts, including prepaid insurance. The company had $ 818 in prepaid insurance at March 31, 2011, and $ 1,338 at March 31, 2012. It also paid $ 2,345 in June 2011 to renew its insurance policies. Prepare the adjusting journal entry on March 31, 2012, to record the amount of insurance expense for fiscal year 2012. The payment of $ 2,345 was debited to the insurance expense account.
3. Explain the nature of the accrued liabilities account. What would have caused the account balance to decrease during the year?
4. The company’s board of directors declared dividends of $ 4,905 during the year. Prepare a summary journal entry to record the amount of dividends paid during the year.
5. The company is required to pay income taxes in advance on a quarterly basis even though the exact amount of income taxes expense is not calculated until the end of the fiscal year. Compute the amount of income taxes expense for 2012 and prepare the related adjusting journal entry at March 31, 2012.
6. The company’s long- term debt includes a long- term bank loan for $ 6,000. The company signed for this loan on October 31, 2011, to be repaid on October 31, 2012. Interest on the loan, at an annual rate of 8 percent, is payable each year on October 31. Prepare the adjusting journal entry that should be made on March 31, 2012, to recognize interest expense for fiscal year 2012.
7. Assume that the company’s accountant did not record the journal entry you prepared for (6) above. What would be the effect of this error (overstatement, understatement, no effect) on the following:
a. Total assets at March 31, 2012.
b. Net earnings for the year 2012, assuming that the company is subject to an income tax rate of 40 percent.
c. Current liabilities at March 31, 2012.

  • CreatedAugust 04, 2015
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