Question: On December 31, 2011, the bookkeeper for
On December 31, 2011, the bookkeeper for Grillo Company prepared the following income statement and balance sheet summarized here but neglected to consider three adjusting entries.
Data on the three adjusting entries follow:
a. Rent revenue of $2,500 earned for December 2011was neither collected nor recorded.
b. Depreciation of $4,500 on the equipment for 2011 was not recorded.
c. Income tax expense of $5,100 for 2011 was neither paid nor recorded.
Required:
1. Prepare the three adjusting entries that were omitted. Use the account titles shown in the income statement and balance sheet data.
2. Complete the two columns to the right in the preceding tabulation to show the correct amounts on the income statement and balance sheet.
Transcribed Image Text:
As Effects of Corrected Prepared Adjusting Entries Amounts Income Statement $ 97,000 (73,000) Revenues Expenses Income tax expense Net income $ 24,000 Balance Sheet Assets Cash $ 20,000 22,000 Accounts receivable Rent receivable Equipment Accumulated depreciation 50,000 (10,000) $ 82,000 Liabilities Accounts payable Income taxes payable $ 10,000 Stockholders' Equity Contributed capital Retained earnings 40,000 32,000 $ 82,000
> Discuss the probable justification for each of the following provisions of the tax law. a. A tax credit allowed for electricity produced from renewable sources. b. A tax credit allowed for the purchase of a motor vehicle that operates on alternative ener
> Franklin County is in dire financial straits and is considering a number of sources for additional revenue. Evaluate the following possibilities in terms of anticipated taxpayer compliance. a. A property tax on business inventories. b. A tax on intangibl
> Mauve Supplies, Inc., reports total income of $120,000. The corporation’s taxable income is $105,000. What are Mauve’s marginal, average, and effective tax rates?
> Ashley runs a small business in Boulder, Colorado, that makes snow skis. She expects the business to grow substantially over the next three years. Because she is concerned about product liability and is planning to take the company public in 2016, she is
> Marco and Cynthia have decided to go into business together. They will operate a burrito delivery business. They expect to have a loss in the first and second years of the business and subsequently expect to make a substantial profit. Marco and Cynthia a
> Several years ago, Ethan purchased the former parsonage of St. James Church to use as a personal residence. To date, Ethan has not received any ad valorem property tax bills from either the city or the county tax authorities. a. What is a reasonable expl
> Locate the following Regulations, and give a brief topical description of each. Summarize your comments in an e-mail to your instructor. a. Reg. § 1.170A–4A(b)(2)(ii)(C). b. Reg. § 1.672(b)–1. c. Reg. § 20.2031–7(f).
> Eileen, a resident of Wyoming, goes to Montana to purchase her new automobile. She does this because Wyoming imposes a sales tax while Montana does not. Has Eileen successfully avoided the Wyoming sales tax? Explain.
> The Irontown Independent School District wants to sell a parcel of unimproved land that it does not need. Its three best offers are as follows: from the State Department of Public Safety (DPS), $4.3 million; from Trinity Lutheran Church, $4.2 million; an
> Some tax rules can be justified on multiple grounds (e.g., economic or social). In this connection, comment on the possible justification for the rules governing the following. a. Pension plans. b. Education. c. Home ownership.
> When taxes are “too high,” taxpayers start to cheat on their taxes and dangerous consequences can result. Evaluate this statement. Give at least two examples to illustrate your conclusions.
> Prepare an outline for a 10-minute speech to give to your government class. The speech is titled “If You Don’t Pay Federal Taxes, You Can’t Vote.”
> “How I Would Apply Federal Income Tax Law to Encourage the Availability of Universal Broadband in This Community” to submit to your economics professor.
> Discuss with respect to the Federal policy for reducing poverty: a. The individual income tax. b. The Social Security tax.
> Using the facts of Problem 15, determine the 2015 end-of-year balance in Mini’s deferred tax asset and deferred tax liability balance sheet accounts.
> Using the facts of Problem 13, determine the 2014 end-of-year balance in Mini’s deferred tax asset and deferred tax liability balance sheet accounts.
> Mini, Inc., earns pretax book net income of $750,000 in 2014. Mini deducted $20,000 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini records no other temporary or permanent differences. Assuming that the U.
> Define the terms temporary difference and permanent difference as they pertain to the financial reporting of income tax expenses. Describe how these two book-tax differences affect the gap between book and taxable income. How are permanent and temporary
> Parent, a domestic corporation, owns 100% of Block, a foreign corporation, and Chip, a domestic corporation. Parent also owns 45% of Trial, a domestic corporation. Parent receives no distributions from any of these corporations. Which of these entities’
> Parent, a domestic corporation, owns 100% of Block, a foreign corporation, and Chip, a domestic corporation. Parent also owns 45% of Trial, a domestic corporation. Parent receives no distributions from any of these corporations. Which of these entities’
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following items, and e-mail to your professor a brief summary of the results. a. Charles Y. Choi, T.C. Memo. 2002–183. b. Ltr.Rul. 200231003. c. Action on Decision, 2000–004, May 10, 2000.
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Find one instance of each of the following using a nonsubscription site on the Web or an online library at your school. In an e-mail to your professor, give a full citation for the document and describe how you found it. a. Letter Ruling. b. Action on De
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Locate the following Code provisions, and give a brief description of each in an e-mail to your instructor. a. § 61(a)(13). b. § 643(a)(2). c. § 2503(g)(2)(A).
> Go to the U.S. Tax Court website. a. What different types of cases can be found on the site? b. What is a Summary Opinion? Find one. c. What is a Memorandum decision? Find one. d. Find the court’s Rules of Practice and Procedures. e. Is the site user-fri
> Find three blogs related to tax practice. On one PowerPoint slide, list the URLs for each blog and the general topical areas addressed at each. Send your slide to the others in your course.
> Locate the following Code citations, and give a brief topical description of each. a. § 708(a). b. § 1371(a). c. § 2503(a).
> Refer to E4-18 Red River Company prepared the following trial balance at the end of its first year of operations ending December 31, 2011. To simplify the case, the amounts given are in thousands of dollars. Other data not yet recorded at December 31,
> Refer to E4-18. Red River Company prepared the following trial balance at the end of its first year of operations ending December 31, 2011. To simplify the case, the amounts given are in thousands of dollars. Other data not yet recorded at December 31
> Red River Company prepared the following trial balance at the end of its first year of operations ending December 31, 2011. To simplify the case, the amounts given are in thousands of dollars. Other data not yet recorded at December 31, 2011 include:
> Tyson, Inc., a party rental business, completed its first year of operations on December 31, 2011. Because this is the end of the annual accounting period, the company bookkeeper prepared the following tentative income statement: Income Statement, 2011
> On December 31, 2011, Yates Company prepared an income statement and balance sheet and failed to take into account four adjusting entries. The income statement, prepared on this incorrect basis, reflected pretax income of $60,000. The balance sheet (befo
> Cohen & Boyd, Inc., publishers of movie and song trivia books, made the following errors in adjusting the accounts at year-end (December 31): a. Did not accrue $1,400 owed to the company by another company renting part of the building as a storage f
> Deere & Company is the world’s leading producer of agricultural equipment; a leading supplier of a broad range of industrial equipment for construction, forestry, and public works; a producer and marketer of a broad line of lawn and
> Note 1: On April 1, 2011, Warren Corporation received a $30,000, 10 percent note from a customer in settlement of a $30,000 open account receivable. According to the terms, the principal of the note and interest are payable at the end of 12 months. The a
> Foot Locker, Inc., is a large global retailer of athletic footwear and apparel selling directly to customers and through the Internet. It includes the Foot Locker family of stores, Champs Sports, and Eastbay. The following are several of Foot Locker’s in
> Kate’s Kite Company (a corporation) sells and repairs kites from manufacturers around the world. Its stores are located in rented space in malls and shopping centers. During its first month of operations ended April 30, 2011, Kateâ
> Terbish Company started operations on January 1, 2012. It is now December 31, 2012, the end of the annual accounting period. The part-time bookkeeper needs your help to analyze the following three transactions: a. During 2012, the company purchased offic
> The following accounts are used by Britt’s Knits, Inc. Required: For each of the following nine independent situations, give the journal entry by entering the appropriate code(s) and amount(s). The first transaction is used as an exam
> Refer to E4-7. Cardon’s Boat Yard, Inc., repairs, stores, and cleans boats for customers. It is completing the accounting process for the year just ended, November 30, 2012. The transactions during 2012 have been journalized and posted
> Refer to E4-6 . Dittman’s Variety Store is completing the accounting process for the year just ended, December 31, 2011. The transactions during 2011 have been journalized and posted. The following data with respect to adjusting entrie
> Cardon’s Boat Yard, Inc., repairs, stores, and cleans boats for customers. It is completing the accounting process for the year just ended, November 30, 2012. The transactions during 2012 have been journalized and posted. The following data with respect
> Dittman’s Variety Store is completing the accounting process for the year just ended, December 31, 2011. The transactions during 2011 have been journalized and posted. The following data with respect to adjusting entries are available: a. Wages earned by
> Refer to E4-3 and E4-4. Ramos Company completed its first year of operations on December 31, 2011. All of the 2011 entries have been recorded except for the following: a. At year-end, employees earned wages of $7,000, which will be paid on the next payr
> Aubrae Company is making adjusting entries for the year ended December 31, 2011. In developing information for the adjusting entries, the accountant learned the following: a. A two-year insurance premium of $3,600 was paid on October 1, 2011, for coverag
> Ramos Company completed its first year of operations on December 31, 2011. All of the 2011 entries have been recorded except for the following: a. At year-end, employees earned wages of $7,000, which will be paid on the next payroll date, January 6, 2012
> In its annual report, Hewlett-Packard Company states, “We are a leading global provider of products, technologies, solutions and services to individual consumers, small- and medium-sized businesses, and large enterprises, including cust
> Refer to E3-13 . Lisa Frees and Amelia Ellinger had been operating a catering business for several years. In March 2011, the partners were planning to expand by opening a retail sales shop and decided to form the business as a corporation called Traveli
> The following T-accounts indicate the effects of normal business transactions: Required: 1. Describe the typical investing and financing transactions that affect each T-account. That is, what economic events occur to make each of these accounts increa
> Paige Consultants, Inc., provides marketing research for clients in the retail industry. The company had the following unadjusted balances at September 30, 2012: Required: Prepare in good form an unadjusted trial balance for Paige Consultants, Inc., a
> As a team, select an industry to analyze. Reuters provides lists of industries under Sectors and Industries at www.reuters.com . (Click on an industry and then select Company Rankings for a list of members of that industry.) Each team member should acqui
> Crystal Mullinex owns and operates Crystal’s Day Spa and Salon, Inc. She has decided to sell the business and retire. She has had discussions with a representative from a regional chain of day spas. The discussions are at the complex st
> Waddell Company was organized on January 1, 2011. At the end of the first year of operations, December 31, 2011, the bookkeeper prepared the following trial balances (amounts in thousands of dollars): Required: 1. Based on inspection of the two trial b
> Carey Land Company, a closely held corporation, invests in commercial rental properties. Carey’s annual accounting period ends on December 31. At the end of each year, numerous adjusting entries must be made because many transactions completed during cur
> The pre-closing balances in the T-accounts of Waldman Company at the end of the third year of operations, December 31, 2011, follow. The 2011 adjusting entries are identified by letters. Required: 1. Develop three 2011 trial balances for Waldman Compan
> The following information was provided by the records of Elm Tree Apartments (a corporation) at the end of the annual fiscal period, December 31, 2011: Rent a. Rent revenue collected in cash during 2011 for occupancy in 2011, $492,000. b. Rent revenue e
> You are the regional sales manager for Miga News Company. Miga is making adjusting entries for the year ended March 31, 2013. On September 1, 2012, customers in your region paid $24,000 cash for three-year magazine subscriptions beginning on that date. T
> Stoscheck Moving Corporation has been in operation since January 1, 2012. It is now December 31, 2012, the end of the annual accounting period. The company has not done well financially during the first year, although revenue has been fairly good. The th
> Refer to E3-13 . Lisa Frees and Amelia Ellinger had been operating a catering business for several years. In March 2011, the partners were planning to expand by opening a retail sales shop and decided to form the business as a corporation called Traveli
> Refer to the financial statements of American Eagle Outfitters in Appendix B, Urban Outfitters in Appendix C, and the Industry Ratio Report in Appendix D at the end of this book. Required: 1. What was Advertising Expense for each company for the most re
> Waltman Furniture Repair Service, a company with two stockholders, began operations on June 1, 2011. The following T-accounts indicate the activities for the month of June. Required: Explain events ( a ) through (d) that resulted in the entries in the
> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book. Required: 1. How much is in the Prepaid Expenses and Other Current Assets account at the end of the most recent year (for the year ended January 31, 2009)? Wher
> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. Required: 1. How much cash did the company pay for income taxes in its 2008 fiscal year (for the year ended January 31, 2009)? 2. What was the company’
> South Bend Repair Service Co. keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period, December 31, 2011: Data not yet r
> Blaine Air Transport Service, Inc., has been in operation for three years. The following transactions occurred in February: February 1 Paid $275 for rent of hangar space in February. February 2 Purchased fuel costing $490 on account for the next fli
> Vail Resorts, Inc., owns and operates five premier year-round ski resort properties (Vail Mountain, Beaver Creek Resort, Breckenridge Mountain, and Keystone Resort, all located in the Colorado Rocky Mountains, and Heavenly Valley Mountain Resort, located
> Sysco, formed in 1969, is North America’s largest marketer and distributor of food service products, serving approximately 400,000 restaurants, hotels, schools, hospitals, and other institutions. The following summarized transactions are typical of those
> Wolverine World Wide, Inc., manufactures military, work, sport, and casual footwear and leather accessories under a variety of brand names, such as Hush Puppies, Wolverine, and Bates, to a global market. The following transactions occurred during a recen
> The following transactions occurred during a recent year: a. Issued stock to organizers for cash (example). b. Purchased equipment on credit. c. Declared and paid cash dividends. d. Earned revenue, collected cash. e. Incurred expenses, on credit. f
> Revenues are normally recognized when goods or services have been provided and payment or promise of payment has been received. Expense recognition is guided by an attempt to match the costs associated with the generation of those revenues to the same ti
> Taos Company is completing the information processing cycle at the end of its fiscal year, December 31, 2011. Following are the correct balances at December 31, 2011, for the accounts both before and after the adjusting entries for 2011. Required: 1. C
> Revenues are normally recognized when the delivery of goods or services has occurred, there is persuasive evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured. The amount recorded is th
> Payson Sports, Inc., sells sports equipment to customers. Its fiscal year ends on December 31. The following transactions occurred in 2012: a. Purchased $314,000 of new sports equipment inventory; paid $90,000 in cash and owed the rest on account. b. Pai
> Match each definition with its related term by entering the appropriate letter in the space provided. There should be only one definition per term (that is, there are more definitions than terms). Term Definition (1) Expenses (2) Gains (3) Revenue
> As a team, select an industry to analyze. Reuters provides lists of industries under Sectors and Industries at www.reuters.com . (Click on an industry and then select Company Rankings for a list of members of that industry.) Each team member should acqui
> Your best friend from home writes you a letter about an investment opportunity that has come her way. A company is raising money by issuing shares of stock and wants her to invest $20,000 (her recent inheritance from her great-aunt’s es
> Pete’s Painting Service was organized as a corporation on January 20, 2011, by three individuals, each receiving 5,000 shares of stock from the new company. The following is a schedule of the cumulative account balances immediately afte
> The October 4, 2004, edition of BusinessWeek presented an article titled “Fuzzy Numbers” on issues related to accrual accounting and its weaknesses that have led some corporate executives to manipulate estimates in their favor, sometimes fraudulently. Yo
> Refer to the annual report for American Eagle Outfitters in Appendix B. Required: 1. The annual report or 10-K report for American Eagle Outfitters provides selected financial data for the last five years. Compute the total asset turnover ratio for eac
> Mike Lynch is the manager of an upstate New York regional office for an insurance company. As the regional manager, his compensation package comprises a base salary, commissions, and a bonus when the region sells new policies in excess of its quota. Mike
> Julio Estela started and operated a small boat repair service company during 2012. He is interested in obtaining a $100,000 loan from your bank to build a dry dock to store boats for customers in the winter months. At the end of the year, he prepared the
> Refer to AP4-3. Bill’s Catering Company is at its accounting year-end, December 31, 2011. The following data that must be considered were developed from the company’s records and related documents: a. During 2011, off
