Question : 33) Data from the accounting system of Quiche and Tell, : 1253176

 

33) Data from the accounting system of Quiche and Tell, Inc. are provided below. All amounts are before the current year’s adjustments are made. All adjustments are made at yearend.

 

Quiche and Tell, Inc.

Balance Sheet

December 31, 2011

Assets

      Liabilities and shareholders’ equity

Cash

    $350,000

  Accounts payable

$15,000

Inventory

500,000

  Salaries payable

50,000

Supplies

20,000

  Notes payable

35,000

Prepaid rent

30,000

  Contributed capital

1,000,000

Equipment

500,000

  Retained earnings

200,000

Accumulated depreciation

(100,000)

  Total liabilities and

 

Total Assets

1,300,000

  shareholders’ equity

$1,300,000

 

Required:

Prepare the balance sheet after year-end adjustments given the following additional information.

a.A count of supplies reveals $4,000 on hand at the end of the year.

b.One-third of the prepaid rent was used up during the year.

c.One-fifth of the equipment is depreciated each year.

d.$40,000 of work for customers has been completed, but not yet billed or collected.

e.Salaries of $20,000 have been earned by employees but not yet paid.

f.The notes payable are for amounts borrowed on January 1 of this year at 12% interest.

Answer:                           Quiche and Tell, Inc.

Balance Sheet

December 31, 2011

Assets

       Liabilities and shareholders’ equity

Cash

$    350,000

  Accounts payable

$15,000

Accounts receivable

40,000

  Salaries payable

70,000

Inventory

500,000

  Notes payable

35,000

Supplies

4,000

  Interest payable

4,200

Prepaid rent

20,000

  Contributed capital

1,000,000

Equipment

500,000

  Retained earnings

89,800

Accum. depreciation

(200,000)

  Total liabilities and

 

Total Assets

$1,214,000

  shareholders’ equity

$1,214,000

 

Supplies $20,000 – 16,000 used up = $4,000 left over

Prepaid rent $30,000 – 10,000 used up = $20,000 left over

Accumulated depreciation increases by 1/5 of $500,000.

Salaries payable and Notes payable go up by the amount accrued.

Retained earnings ending balance =

$200,000 – 16,000 – 10,000 – 100,000 + 40,000 — 20,000 — 4,200 = $89,800

Diff: 3

Skill:  Analytic skills

34) On May 1, 2009 Canseco Oil Drilling Company paid $4,500,000 for a 3-year insurance policy that covers all of its drilling equipment around the world. The company recorded the purchase as prepaid insurance. Complete the chart below:

 

 

Cash Paid

Insurance

Expense

Prepaid

Insurance

Year ended Dec. 31, 2009

$

$

$

Year ended Dec. 31, 2010

$

$

$

Year ended Dec. 31, 2011

$

$

$

Year ended Dec. 31, 2012

$

$

$

 

 

35) Lacy & Jacobs, Attorneys at Law, purchased office computers for $24,600 on  February 1, 2009. The computers are estimated to have a $3,000 salvage value and to last for a total of 3 years. The firm has a December 31 yearend and prepares annual financial reports at that time.

Required:

1. Determine the depreciation expense that will be reported on the income statement for the year ended December 31, 2009.

2. Determine the balance sheet carrying value (also known as book value) of the computers on December 31, 2009, 2010 and 2011.