PART A: Sparty Corporation adjusts its accounts only at year-end. The following information is available as...

  

 

 

 

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PART A: Sparty Corporation adjusts its accounts only at year-end. The following information is available as a source for preparing adjusting entries at December 31, 2019. 1. During July 2019, Sparty sold 100 one-year subscriptions for their monthly publication at $72 each, with the subscriptions starting October 1. When Sparty received the $7,200 in subscription payments it credited the liability account titled Unearned Subscription Revenue. 2. On November 1, 2019, Sparty paid $6,000 for a 6-month insurance policy. When Sparty paid the $6,000 it recognized the entire amount as a debit to an asset account titled Prepaid Insurance. 3. Sparty failed to recognize $1,500 in rent for December owed to Sparty by one of Sparty's tenant that rents a part of Sparty's building. 4 The Supplies Inventory account had a $15,000 balance at the beginning of the year (January 1, 2019). During the year, $13,000 of supplies were acquired, with the Supplies Expense account debited at the time of purchase. The supplies count at the end of the year (December 31, 2019) showed $11,000 of supplies still on hand. Required: A. For each of the above numbered items, prepare the necessary adjusting journal entry. If no adjusting entry is required, explain why. Put the adjusting journal entries in the worksheet tab titled "Part A. Question A." B. Below are 4 adjusting journal entries (AJES) that another firm, Wolverine, failed to make at year end. For each entry NOT MADE indicate the effect that each omitted AJE would have on the Wolverine's financial statements for the year ended 12/31/2019. Use O for overstated, U for understated, and NE for no effect. Organize your answer in tabular form, using the column headings shown below and provided in the worksheet titled "Part A, Question B." Example 0: At year end, Wolverine failed to make the below AJE to record that fact that employees earned $4,000 in wages which will be paid on the next payroll date in January 2019. Compensation Expense (+E, -NI, -R/E, -SE) 4,000 Salaries Payable (+L) 4,000 If that adjustment was not made expenses and liabilities would be understated by $4,000. If expenses are understated, then Net Income and Stockholders' Equity will be overstated. Income Statement Expense = Net Income Assets = U Adjusting entry Example 0 Balance Sheet Revenue Liabilities + Stockholders' Equ NE NE U AJE #1: At year end, Wolverine failed to make the below AJE to recognize that a tenant owed Wolverine $1,000 rent for the month of December. The rent is due to Wolverine in January of 2019. Rent Receivable 1,000 0 Rent Revenue 1,000 AJE #2: At year end, Wolverine failed to make the below AJE to record that Wolverine had some debt that had accrued interest of $400. Interest Expense 400 Interest Payable 400 0 AJE #3: At year end, Wolverine failed to make the below AJE to record that Wolverine performed $3,000 in services in December that had been prepaid by the customer in November. Note that when the services were paid for in November, Wolverine increased (debited) cash and increased (credited) Unearned Service Revenue, a liability account. Uneamed Service Revenue 3,000 Service Revenue 3,000 AJE #4: At year end, Wolverine failed to make the below AJE to record depreciation of $2,000. Depreciation Expense 2,000 Accumulated Depreciation 2,000 PART B: At the beginning of 2019, the Buckeye Corporation added a new product line to its production and sales. Buckeye's Balance Sheet and Income Statement are provided in the "Homework 4 Student Workbook" in the worksheet titled "Part B Financials." Required: Calculate the following ratios for both 2019 and 2018. Do not retype the amounts used in the ratios (instead refer to the appropriate cells from the provided balance sheet and income statement). Round your answers to 3 decimal places. In 2-3 sentences each, discuss your interpretation of the change in each ratio across the two years, considering the addition of a new product line. Put your answers in the worksheet titled "Part B Answer." Use a separate textbox for your discussion of the change in each ratio. a. Total Asset Tumover (Net Sales/Average Total Assets) b. Gross Profit Margin (Gross Profit/Net Sales) c. Net Profit Margin (Net Income/Net Sales) d. Return on Assets (ROA) (Net Income/Average Total Assets) Total assets were $750,000 on December 31, 2017. PART A: Sparty Corporation adjusts its accounts only at year-end. The following information is available as a source for preparing adjusting entries at December 31, 2019. 1. During July 2019, Sparty sold 100 one-year subscriptions for their monthly publication at $72 each, with the subscriptions starting October 1. When Sparty received the $7,200 in subscription payments it credited the liability account titled Unearned Subscription Revenue. 2. On November 1, 2019, Sparty paid $6,000 for a 6-month insurance policy. When Sparty paid the $6,000 it recognized the entire amount as a debit to an asset account titled Prepaid Insurance. 3. Sparty failed to recognize $1,500 in rent for December owed to Sparty by one of Sparty's tenant that rents a part of Sparty's building. 4 The Supplies Inventory account had a $15,000 balance at the beginning of the year (January 1, 2019). During the year, $13,000 of supplies were acquired, with the Supplies Expense account debited at the time of purchase. The supplies count at the end of the year (December 31, 2019) showed $11,000 of supplies still on hand. Required: A. For each of the above numbered items, prepare the necessary adjusting journal entry. If no adjusting entry is required, explain why. Put the adjusting journal entries in the worksheet tab titled "Part A. Question A." B. Below are 4 adjusting journal entries (AJES) that another firm, Wolverine, failed to make at year end. For each entry NOT MADE indicate the effect that each omitted AJE would have on the Wolverine's financial statements for the year ended 12/31/2019. Use O for overstated, U for understated, and NE for no effect. Organize your answer in tabular form, using the column headings shown below and provided in the worksheet titled "Part A, Question B." Example 0: At year end, Wolverine failed to make the below AJE to record that fact that employees earned $4,000 in wages which will be paid on the next payroll date in January 2019. Compensation Expense (+E, -NI, -R/E, -SE) 4,000 Salaries Payable (+L) 4,000 If that adjustment was not made expenses and liabilities would be understated by $4,000. If expenses are understated, then Net Income and Stockholders' Equity will be overstated. Income Statement Expense = Net Income Assets = U Adjusting entry Example 0 Balance Sheet Revenue Liabilities + Stockholders' Equ NE NE U AJE #1: At year end, Wolverine failed to make the below AJE to recognize that a tenant owed Wolverine $1,000 rent for the month of December. The rent is due to Wolverine in January of 2019. Rent Receivable 1,000 0 Rent Revenue 1,000 AJE #2: At year end, Wolverine failed to make the below AJE to record that Wolverine had some debt that had accrued interest of $400. Interest Expense 400 Interest Payable 400 0 AJE #3: At year end, Wolverine failed to make the below AJE to record that Wolverine performed $3,000 in services in December that had been prepaid by the customer in November. Note that when the services were paid for in November, Wolverine increased (debited) cash and increased (credited) Unearned Service Revenue, a liability account. Uneamed Service Revenue 3,000 Service Revenue 3,000 AJE #4: At year end, Wolverine failed to make the below AJE to record depreciation of $2,000. Depreciation Expense 2,000 Accumulated Depreciation 2,000 PART B: At the beginning of 2019, the Buckeye Corporation added a new product line to its production and sales. Buckeye's Balance Sheet and Income Statement are provided in the "Homework 4 Student Workbook" in the worksheet titled "Part B Financials." Required: Calculate the following ratios for both 2019 and 2018. Do not retype the amounts used in the ratios (instead refer to the appropriate cells from the provided balance sheet and income statement). Round your answers to 3 decimal places. In 2-3 sentences each, discuss your interpretation of the change in each ratio across the two years, considering the addition of a new product line. Put your answers in the worksheet titled "Part B Answer." Use a separate textbox for your discussion of the change in each ratio. a. Total Asset Tumover (Net Sales/Average Total Assets) b. Gross Profit Margin (Gross Profit/Net Sales) c. Net Profit Margin (Net Income/Net Sales) d. Return on Assets (ROA) (Net Income/Average Total Assets) Total assets were $750,000 on December 31, 2017.

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PART A PART B Adjustment Entries Date 31Dec 31Dec 31D... View the full answer