Samuels Corp. began operations on January 1, 2017. Its fiscal year end is December 31. Samuels has

Question:

Samuels Corp. began operations on January 1, 2017. Its fiscal year end is December 31. Samuels has decided that prepaid costs are debited to an asset account when paid, and all revenues are credited to revenue when the cash is received. During 2017, the following transactions occurred.

1. On January 1, 2017, Samuels bought office supplies for $4,100 cash. A physical count at December 31, 2017 revealed $1,900 of supplies still on hand.

2. Samuels bought a $6,000, one-year insurance policy for cash on August 1, 2017. The policy came into effect on this date.

3. On November 15, 2017, Samuels received a $1,200 advance cash payment from a client for services to be provided in the future. As at December 31, 2017, one third of these services had not been performed.

4. On December 1, 2017, Samuels rented out excess office space for a six-month period starting on this date, and received a $1,100 cheque for the first and last month's rent.

Instructions

(a) For each of the above transactions, prepare the journal entry for the original transaction and any adjusting entry required at December 31, 2017.

(b) In a business where accounting is performed at several divisions or office locations, is it possible that prepayments would be treated as assets in some offices and as expenses in others when initially recorded? Why or why not? Does the business have to have a consistent approach in all of its offices? Why or why not?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1119048534

11th Canadian edition Volume 1

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

Question Posted: