Accounting problem, obligation facilitate?
Decision Making Across the Organization
BYP4-6. Swiss Valley Park be organized on April 1, 2006, by Erika Barnes. Erika is a worthy representative but a poor accountant. From the trial symmetry prepared by a leisure bookkeeper, Erika prepared the income statement shown at the top of page 213 for the quarter that terminated March 31, 2007.
SWISS VALLEY PARK
Income Statement
For the Quarter Ended March 31, 2007
Revenues
Rental revenues $89,000
Operating expenses
Advertising $ 4,200
Wages 27,600
Utilities 900
Depreciation 800
Repairs 2,800
Total operating expenses 36,300
Net income $52,700
Erika know that something be wrong near the statement because web income have never exceeded $20,000 contained by any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other notes.
You first look at the trial match. In ornament to the statement balance reported contained by the income statement, the ledger contains these select balance at March 31, 2007.
Supplies $ 5,200
Prepaid Insurance 7,200
Notes Payable 14,000
You later spawn inquiries and discover the following.
1.
Rental revenues include advanced rentals for summer-month occupation, $26,000.
2.
There be $1,300 of supplies on foot at March 31.
3.
Prepaid insurance resulted from the pay-out of a 1-year policy on January 1, 2007.
4.
The communication on April 1, 2007, brought the following bills: selling for week of March 24, $110; repairs made March 10, $380; and utilities $240.
5.
There are four personnel who receive wages totaling $290 per hours of daylight. At March 31, 3 days' wages own be incurred but not rewarded.
6.
The details payable is a 3-month, 8% register dated January 1, 2007.
Instructions
With the class divided into groups, answer the following.
a.
Prepare a correct income statement for the quarter done March 31, 2007.
b.
Explain to Erika the across the world permitted accounting principles that she did not follow in preparing her income statement and their effect on her results.
Answers:
Here's something to move you in the right direction:
You after net inquiries and discover the following.
1.
Rental revenues include advanced rentals for summer-month rental, $26,000.
This is what is prearranged as "unearned revenue"...intent you hold the money but still owe the products or services to the customer. Debit Rental Revenues 26,000 and Credit Unearned Rental Revenues (a liability vindication on the set off sheet) 26,000
2.
There be $1,300 of supplies on paw at March 31.
The symmetry for supplies surrounded by the G/L shows 5,200. You want to receive an entry to adjust the stability to 1,300. Debit Expense 3,900 and Credit Supplies 3,900.
3.
Prepaid insurance resulted from the reimbursement of a 1-year policy on January 1, 2007.
This mechanism that three months of this policy own lapsed and the premium for those three months should be expensed. The total year premium = 7,200 which scheme you expense
600 per month. Debit Insurance Expense 1,800 and Credit Prepaid Insurance 1,800.
4.
The communication on April 1, 2007, brought the following bills: hype for week of March 24, $110; repairs made March 10, $380; and utilities $240.
All of these bills should be accrue because they pertain to services or stuff received surrounded by March.
Debit Advertising 110, Debit Repairs 380, Debit Utilities 240, Credit Accrued Expenses 730
5.
There are four team who receive wages totaling $290 per year. At March 31, 3 days' wages hold be incurred but not rewarded.
In this suitcase the 3 days wages should be accrue because they be earn by the personnel but not however rewarded.
Debit Wages 870 (3 x 290) and Credit Accrued Wages 870
6.
The details payable is a 3-month, 8% write down dated January 1, 2007.
Since they are showing no interest expense for this, you inevitability to accrue the interest. I'm assuming the 8% rate is an annual rate, so 14,000 x ((8%/12) x 3) = 280
Debit Interest Expense 280 and Credit Accrued Interest (a liability) 280
Your up to date network income number should come to 19,120.
As far as principles violated, I'll administer you this air.the equivalent principle have be violated. Also deduce roughly speaking copy expenses within the term they are incurred and revenues in the extent they are earn.
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BYP4-6. Swiss Valley Park be organized on April 1, 2006, by Erika Barnes. Erika is a worthy representative but a poor accountant. From the trial symmetry prepared by a leisure bookkeeper, Erika prepared the income statement shown at the top of page 213 for the quarter that terminated March 31, 2007.
SWISS VALLEY PARK
Income Statement
For the Quarter Ended March 31, 2007
Revenues
Rental revenues $89,000
Operating expenses
Advertising $ 4,200
Wages 27,600
Utilities 900
Depreciation 800
Repairs 2,800
Total operating expenses 36,300
Net income $52,700
Erika know that something be wrong near the statement because web income have never exceeded $20,000 contained by any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other notes.
You first look at the trial match. In ornament to the statement balance reported contained by the income statement, the ledger contains these select balance at March 31, 2007.
Supplies $ 5,200
Prepaid Insurance 7,200
Notes Payable 14,000
You later spawn inquiries and discover the following.
1.
Rental revenues include advanced rentals for summer-month occupation, $26,000.
2.
There be $1,300 of supplies on foot at March 31.
3.
Prepaid insurance resulted from the pay-out of a 1-year policy on January 1, 2007.
4.
The communication on April 1, 2007, brought the following bills: selling for week of March 24, $110; repairs made March 10, $380; and utilities $240.
5.
There are four personnel who receive wages totaling $290 per hours of daylight. At March 31, 3 days' wages own be incurred but not rewarded.
6.
The details payable is a 3-month, 8% register dated January 1, 2007.
Instructions
With the class divided into groups, answer the following.
a.
Prepare a correct income statement for the quarter done March 31, 2007.
b.
Explain to Erika the across the world permitted accounting principles that she did not follow in preparing her income statement and their effect on her results.
Answers:
Here's something to move you in the right direction:
You after net inquiries and discover the following.
1.
Rental revenues include advanced rentals for summer-month rental, $26,000.
This is what is prearranged as "unearned revenue"...intent you hold the money but still owe the products or services to the customer. Debit Rental Revenues 26,000 and Credit Unearned Rental Revenues (a liability vindication on the set off sheet) 26,000
2.
There be $1,300 of supplies on paw at March 31.
The symmetry for supplies surrounded by the G/L shows 5,200. You want to receive an entry to adjust the stability to 1,300. Debit Expense 3,900 and Credit Supplies 3,900.
3.
Prepaid insurance resulted from the reimbursement of a 1-year policy on January 1, 2007.
This mechanism that three months of this policy own lapsed and the premium for those three months should be expensed. The total year premium = 7,200 which scheme you expense
600 per month. Debit Insurance Expense 1,800 and Credit Prepaid Insurance 1,800.
4.
The communication on April 1, 2007, brought the following bills: hype for week of March 24, $110; repairs made March 10, $380; and utilities $240.
All of these bills should be accrue because they pertain to services or stuff received surrounded by March.
Debit Advertising 110, Debit Repairs 380, Debit Utilities 240, Credit Accrued Expenses 730
5.
There are four team who receive wages totaling $290 per year. At March 31, 3 days' wages hold be incurred but not rewarded.
In this suitcase the 3 days wages should be accrue because they be earn by the personnel but not however rewarded.
Debit Wages 870 (3 x 290) and Credit Accrued Wages 870
6.
The details payable is a 3-month, 8% write down dated January 1, 2007.
Since they are showing no interest expense for this, you inevitability to accrue the interest. I'm assuming the 8% rate is an annual rate, so 14,000 x ((8%/12) x 3) = 280
Debit Interest Expense 280 and Credit Accrued Interest (a liability) 280
Your up to date network income number should come to 19,120.
As far as principles violated, I'll administer you this air.the equivalent principle have be violated. Also deduce roughly speaking copy expenses within the term they are incurred and revenues in the extent they are earn.