Problem 1: Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement Including Earning per Share:
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trail balance as of the end of the annual accounting period, December 31, 2014:
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Account Titles
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Debit
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Credit
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Cash
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42,000
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|
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Accounts receivable
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11,600
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Supplies
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900
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Prepaid insurance
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800
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Service trucks
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19,000
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Accumulated depreciation
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9,200
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Other assets
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8,300
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Accounts payable
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3,000
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Wages payable
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|
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Income taxes payable
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|
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Note payable (3 years, 10% interest due each December 31)
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17,000
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Common stock (5,000 shares outstanding)
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400
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Additional paid-in-capital
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19,000
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Retained earnings
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6,000
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Service revenue
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61,360
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Remaining expenses (not detailed, excludes income tax)
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33,360
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Income tax expense
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|
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Totals
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115,960
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115,960
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Data not yet recorded at December 31, 2014, included:
a. The supplies count on December 31, 2014, reflected $300 remaining supplies on hand to be used in 2015.
b. Insurance expired during 2014, $800.
c. Depreciation expense for 2014, $3,700.
d. Wages earned by employees not yet paid on December 31, 2014, $640.
e. Income tax expense, $5,540.
Required:
1. Record the 2014 adjusting entries.
2. Prepare an income statement and a classified balance sheet that include the effects of the preceding five transactions.
3. Record the 2014 closing entry.
Problem 2: Finding the Financial Information:
Refer to the financial statements of Urban Outfitters.
Required:
1. How much is in the Prepaid Expense and Other Current Assets account at the end of the most recent year (for the year ended January 31, 2012)? Where did you find this information?
2. What did the company report for Deferred Rent and Other Liabilities at January 31, 2012? Where did you find this information?
3. What is the difference between prepaid rent and deferred rent?
4. Describe in general terms what accrued liabilities are.
5. What would generate the interest income that is reported on the income statement?
6. What company accounts would not have balances on a post-closing trial balance?
7. Prepare the closing entry, if any, for Prepaid Expenses.
8. What are the company's earnings per share (basic only) for the three years reported?
9. Compute the company's total assets turnover ratio for the three years reported. What does the trend suggest to you about Urban Outfitters?