Q1) The balance sheet for Sparky Company at December 31, 2016 indicated that total assets were $125,000 and total liabilities were $92,800. At December 31, 2017 total assets had increased by $67,000 and total liabilities had increased by $11,600. During 2017, Sparky issued $15,000 in new common stock and paid a $12,000 dividend. You discover that while the dividend account had been closed at year end, no other closing entry had yet been recorded for Retained Earnings. Provide the missing closing entry: (Choose from the following account titles when recording your Closing Entry: Cash, Net Income, Retained Earnings, Net Loss, Income Summary, Common Stock, Dividends. *Note: to avoid any typo errors when entering your answer into blackboard, copy the account title from the list presented above and paste it into the appropriate answer blank.
Q2) You have recently been hired by ABC, Inc. to review its financial statements prepared for the fiscal years ending December 31, 2016 and 2017. Your review reveals the following:
A three-year insurance policy was purchased on April 1, 2016 for $62,100. In recording the original entry, the bookkeeper debited Insurance Expense for the full amount of $62,100. Your investigation finds that no adjusting entries have ever been made on this policy.
Given this error, determine the effects on the year-end financial statements for December 31, 2016 & 2017.