Prepare the closing entries that gomez would record on

Question

Assignment

Exercise 1

Accounting for prepaid expenses and unearned revenues. Hawaii-Blue began business on January 1 of the current year and offers deep-sea fishing trips to tourists. Tourists pay $125 in advance for an all-day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February.

Hawaii-Blue rents its fishing boat from Pacific Yacht Supply. An agreement was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for 2 full years.

1. Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January.

2. Calculate Hawaii-Blue's total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?

3. Prepare journal entries to record (1) the payment to Pacific Yacht Supply and (2) the subsequent adjustment on January 31.

4. On what financial statement would Hawaii-Blue's January boat rental cost appear?

Exercise 2

Closing entries. Gomez Company had the following adjusted trial balance on December 31:

Cash	$ 2,300
Accounts Receivable	16,500
Prepaid Insurance	1,200
Land	40,000
Accounts Payable		$ 1,800
Miguel Gomez, Capital		43,700
Miguel Gomez, Drawing	2,500
Service Revenue		38,000
Rent Expense	9,000
Insurance Expense	5,400
Advertising Expense	3,500
Utilities Expense	3,100
	$83,500	$83,500

1. Prepare the closing entries that Gomez would record on December 31.

Exercise 3

Adjusting entries. You have been retained to examine the records of Kathy's Day Care Center as of December 31, 20X3, the close of the current reporting period. In the course of your examination, you discover the following:

1. On January 1, 20X3, the Supplies account had a balance of $2,350. During the year, $5,520 worth of supplies was purchased, and a balance of $1,620 remained unused on December 31.

2. Unrecorded interest owed to the center totaled $275 as of December 31.

3. All clients pay tuition in advance, and their payments are credited to the Unearned Tuition Revenue account. The account was credited for $75,500 on August 31. With the exception of $15,500, which represented prepayments for 10 months' tuition from several well-to-do families, all amounts were for the current semester ending on December 31.

4. Depreciation on the school's van was $3,000 for the year.

5. On August 1, the center began to pay rent in 6-month installments of $21,000. Kathy wrote a check to the owner of the building and recorded the check in Prepaid Rent, a new account.

6. Two salaried employees earn $400 each for a 5-day week. The employees are paid every Friday, and December 31 falls on a Thursday.

7. Kathy's Day Care paid insurance premiums as follows, each time debiting Prepaid Insurance:

Date Paid	Policy No.	Length of Policy	Amount
Feb. 1, 20X2	1033MCM19	1 year	$540
Jan. 1, 20X3	7952789HP	1 year	912
Aug. 1, 20X3	XQ943675ST	2 years	840

Instructions

The center's accounts were last adjusted on December 31, 20X2. Prepare the adjusting entries necessary under the accrual basis of accounting.

Exercises 4

Bank reconciliation and entries. The following information was taken from the accounting records of Palmetto Company for the month of January:

Balance per bank	$6,150
Balance per company records	3,580
Bank service charge for January	20
Deposits in transit	940
Interest on note collected by bank	100
Note collected by bank	1,000
NSF check returned by the bank with the bank statement	650
Outstanding checks	3,080

1. Prepare Palmetto's January bank reconciliation.
2. Prepare any necessary journal entries for Palmetto.

Exercise 5

Allowance method: estimation and balance sheet disclosure. The following preadjusted information for the Maverick Company is available on December 31:

Accounts receivable	$107,000
Allowance for uncollectible accounts	5,400 (credit balance)
Credit sales	250,000

1. Prepare the journal entries necessary to record Maverick's uncollectible accounts expense under each of the following assumptions:
   (1) Uncollectible accounts are estimated to be 5% of Credit Sales.
   (2) Uncollectible accounts are estimated to be 14% of Accounts Receivable.
2. How would Maverick's Accounts Receivable appear on the December 31 balance sheet under assumption (1) of part (a)?
3. How would Maverick's Accounts Receivable appear on the December 31 balance sheet under assumption (2) of part (a)?

Exercise 6

Allowance method: analysis of receivables. At a January 20X2 meeting, the president of Sonic Sound directed the sales staff "to move some product this year." The president noted that the credit evaluation department was being disbanded because it had restricted the company's growth. Credit decisions would now be made by the sales staff.

By the end of the year, Sonic had generated significant gains in sales, and the president was very pleased. The following data were provided by the accounting department:

	20X2	20X1
Sales	$23,987,000	$8,423,000
Accounts Receivable, 12/31	12,444,000	1,056,000
Allowance for Uncollectible Accounts, 12/31	?	23,000 cr.

The $12,444,000 receivables balance was aged as follows:

Age of Receivable	Amount	Percentage of Accounts Expected to Be Collected
Under 31 days	$5,321,000	99%
31-60 days	3,890,000	90
61-90 days	1,067,000	80
Over 90 days	2,166,000	60

Assume that no accounts were written off during 20X2.

Instructions

1. Estimate the amount of Uncollectible Accounts as of December 31, 20X2.
2. What is the company's Uncollectible Accounts expense for 20X2?
3. Compute the net realizable value of Accounts Receivable at the end of 20X1 and 20X2.
4. Compute the net realizable value at the end of 20X1 and 20X2 as a percentage of respective year-end receivables balances. Analyze your findings and comment on the president's decision to close the credit evaluation department.

Attachment:- Report.rar