8. On December 31, 2020, Sparkler Limited prepared a statement of earnings and balance sheet and...

 

  

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8. On December 31, 2020, Sparkler Limited prepared a statement of earnings and balance sheet and failed to take into account four adjusting entries. The incorrect statement of earnings showed net carnings of $40,000. The balance sheet showed total assets, $120,000; total liabilities, $50,000; and shareholders' equity, $70,000. The data for the four adjusting entries were: |(1) Amortization of $3,500 was not recorded on equipment. (2) Salaries amounting to $6,200 for the last two days in December were not paid and not recorded. The next payroll will be in January. (3) Rent of S11,000 was paid for two months in advance on December 1. The entire amount was debited to Rent Expense when paid. (4) Income tax expense was estimated to be $6,000 for the year. Instructions Complete the following tabulation to correct the financial statement amounts shown (indicate deductions with parentheses): Net Earnings Total Assets Total Liabilities Shareholders Item Equity Incorrect balances $40,000 $120,000 $50,000 $70,000 Effects of Amortization Salaries Rent Income tax Correct balances Prepare year-end adjustments for the following transactions. Omit explanations. 1. Accrued interest on notes receivable is $105. 2. Unearned revenues earned totals $2,200. 3. Eighteen months rent, totalling $30,000, was paid in advance at the beginning of the year. 4. Services totalling $2,800 had been performed but not yet billed at the beginning of the year. 5. Equipment had been purchased in a prior year for 18,000. The estimated useful life is 4 years. Depreciation on equipment totalled $4,000 for the year. 6. Supplies purchased and charged to expense for the year totalled $1,690. By year end, $590 of those supplies were still on hand. 7. Salaries owed to employees at the end of the year total $1,000. 0. Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 The Spunout Limited began the year with a $2,000 balance in the Office Supplies on Hand account. During the year, $8,200 worth of additional office supplies were purchased. A physical count of office supplies on hand at the end of the year revealed that $8,400 worth of office supplies had been used during the year. No adjusting entry has been made until year end. Case 2 The Planner Co. Ltd. has a calendar year-end accounting period. On July 1, the company purchased office equipment for $28,800. The estimated useful life of the equipment is 6 years. No adjusting entry has been made until year end. Case 3 Fanner Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $600 per month apartments and one tenant in the $1,000 per month apartment had not paid their December rent as of December 31". 8. On December 31, 2020, Sparkler Limited prepared a statement of earnings and balance sheet and failed to take into account four adjusting entries. The incorrect statement of earnings showed net carnings of $40,000. The balance sheet showed total assets, $120,000; total liabilities, $50,000; and shareholders' equity, $70,000. The data for the four adjusting entries were: |(1) Amortization of $3,500 was not recorded on equipment. (2) Salaries amounting to $6,200 for the last two days in December were not paid and not recorded. The next payroll will be in January. (3) Rent of S11,000 was paid for two months in advance on December 1. The entire amount was debited to Rent Expense when paid. (4) Income tax expense was estimated to be $6,000 for the year. Instructions Complete the following tabulation to correct the financial statement amounts shown (indicate deductions with parentheses): Net Earnings Total Assets Total Liabilities Shareholders Item Equity Incorrect balances $40,000 $120,000 $50,000 $70,000 Effects of Amortization Salaries Rent Income tax Correct balances Prepare year-end adjustments for the following transactions. Omit explanations. 1. Accrued interest on notes receivable is $105. 2. Unearned revenues earned totals $2,200. 3. Eighteen months rent, totalling $30,000, was paid in advance at the beginning of the year. 4. Services totalling $2,800 had been performed but not yet billed at the beginning of the year. 5. Equipment had been purchased in a prior year for 18,000. The estimated useful life is 4 years. Depreciation on equipment totalled $4,000 for the year. 6. Supplies purchased and charged to expense for the year totalled $1,690. By year end, $590 of those supplies were still on hand. 7. Salaries owed to employees at the end of the year total $1,000. 0. Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 The Spunout Limited began the year with a $2,000 balance in the Office Supplies on Hand account. During the year, $8,200 worth of additional office supplies were purchased. A physical count of office supplies on hand at the end of the year revealed that $8,400 worth of office supplies had been used during the year. No adjusting entry has been made until year end. Case 2 The Planner Co. Ltd. has a calendar year-end accounting period. On July 1, the company purchased office equipment for $28,800. The estimated useful life of the equipment is 6 years. No adjusting entry has been made until year end. Case 3 Fanner Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $600 per month apartments and one tenant in the $1,000 per month apartment had not paid their December rent as of December 31".

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