Question 3: You have just started as a staff auditor for a small CPA firm. During the course of the audit, you discover the following items related to a single client firm:

a)During the year, the firm declared and paid $10,000 in dividends.

b)Your client has been named defendant in a legal suit involving a material amount. You have received from the client's counsel a statement indicating little likelihood of loss.

c)Because of cost control actions and general employee dissatisfaction, it is likely that the client will suffer a costly strike in the near future.

d)Twenty days after closing, the client suffered a major fire in one of its plants.

e)The cash account includes a substantial amount set aside for payment of pension obligations.

f)Marketable securities include a large quantity of shares of stock purchased for control purposes.

g)Land is listed on the balance sheet at its market value of $1,000,000. It cost $670,000 to purchase 12 years ago.

h)During the year, the government of Uganda expropriated a plant located in that country. There was substantial loss.

Required: How would each of these items be reflected in the year-end balance sheet.

Question 4: Gaffney Company had these adjusting entry situations at the end of December.

a)On July 1, Gaffney Company paid $1,200 for a one-year insurance policy. The policy was for the period July 1 through June 30. The transaction was recorded as prepaid insurance and a reduction in cash.

b)On September 10, Gaffney Company purchased $500 of supplies for cash. The purchase was recorded as supplies. On December 31, it was determined that various supplies had been consumed in operations and that supplies costing $200 remained on hand.

c)Gaffney Company received $1,000 on December 1 for services to be performed in the following year. This was recorded on December 1 as an increase in cash and as revenue. As of December 31, this needs to be recognized as Unearned Revenue, a liability account.

d)As of December 31, interest charges of $200 have been incurred because of borrowed funds. Payment will not be made until February. A liability for the interest needs to be recognized, as does the interest expense.

e)As of December 31, a $500 liability for salaries needs to be recognized.

f)As of December 31, Gaffney Company had provided services in the amount of $400 for Jones Company. An asset, Accounts Receivable, needs to be recognized along with the revenue.

Required: Record the adjusting entries at December 31, using T-accounts.

Note: All the answers must be handwritten and in an organized manner