Problem $1$: Loan Application

Denver started a time passing business several years ago. For the company$$s expansion, he decided

to apply for a loan from K$-$Bank. With the help of his friend, who is currently enrolled in an

Accounting Basics course at a local college, Denver submitted the following financial statements

to the loan officer;

Timepass Business Services

Income Statement

For the Year Ended October $31,2021$

Service revenue $.................$ $$675,000$

Less: Rent paid $..................$ $$187,200$

Wages paid $................148,500$

Supplies paid $..............42,000$

Utilities paid $...............39,000$

Insurance paid $.............21,600$

Miscellaneous payments. $...54,600492,900$

Net income $.....................$ $ $182,100$

Timepass Business Services

Balance Sheet

October $31,2021$

Assets

Cash $...........................$ $ $95,400$

Amounts due from customers $....112,500$

Truck $...........................332,100$

Total assets $.....................$ $$540,000$

Equities

Owner$$s capital $.................$ $$540,000$

The loan officer asked Denver if he used the accrual basis of accounting for revenues and

expenses. Denver replied, $$Yes $$ of course, my friend is an accounting genius and knows how to

use accrual accounting.$$ For example, look at the $$Amounts Due from Customers$-$doesn$$t it

say I used accrual accounting?

The loan officer then asked whether Denver made adjustments before preparing the financial

statements. Denver confidently said, $$No$,$ my friend did not tell me anything about adjustments.$$

A$.$ Why did the loan officer suspect that the accounts had not been adjusted before preparing

the statements?

B$.$ The loan officer advised Denver to resubmit the application after making the adjustments.

Suggest likely accounts that might need to be adjusted before an accurate set of financial

statements could be prepared.

Problem $2$: Adjusting Journals

The LazyBuddy Company

Trial Balances

December $31,2021$

Instructions

Post the seven adjusting journal entries to adjust the accounts on December $31$