Liberty ACCT 301 Assignment Week 2 Fall B, 2014 (Graded)

Following are two income statements for Alexis Co. for the year ended December 31. The left column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts.

ALEXIS CO. Income Statements For Year Ended December 31
	Unadjusted	Adjusted
Revenues
Fees earned	$	24,000	$	30,000
Commissions earned		42,500		42,500
Total revenues		66,500		72,500
Expenses
Depreciation expense—Computers		0		1,500
Depreciation expense—Office furniture		0		1,750
Salaries expense		12,500		14,950
Insurance expense		0		1,300
Rent expense		4,500		4,500
Office supplies expense		0		480
Advertising expense		3,000		3,000
Utilities expense		1,250		1,320
Total expenses		21,250		28,800
Net income	$	45,250	$	43,700

Analyze the statements and prepare the eight adjusting entries that likely were recorded. (Note: 30% of the $6,000 adjustment for Fees Earned has been earned but not billed, and the other 70% has been earned by performing services that were paid for in advance.)

2.

Exercise 3-8 Determining assets and expenses for accrual and cash accounting LO C2

On June 1, 2011, a company paid a $20,700 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table.

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3

[The following information applies to the questions displayed below.]

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2013, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of itemsathroughh that require adjusting entries on December 31, 2013, follow.

Additional Information Items

a.	An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired.
b.	An inventory count shows that teaching supplies costing $2,800 are available at year-end 2013.
c.	Annual depreciation on the equipment is $13,200.
d.	Annual depreciation on the professional library is $7,200.
e.	On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,500, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2014.
f.	On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI’s accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
g.	WTI’s two employees are paid weekly. As of the end of the year, two days’ salaries have accrued at the rate of $100 per day for each employee.
h.	The balance in the Prepaid Rent account represents rent for December.

Problem 3-5A Preparing financial statements from the adjusted trial balance and calculating profit margin LO P3, A1, A2

[The following information applies to the questions displayed below.]

6.

Problem 3-5A Part 1

Required:
1(a)	Prepare the income statement for the year ended December 31, 2013.

1(b)	Prepare the statement of owner’s equity for the year ended December 31, 2013.

7.

Problem 3-5A Part 2

2.	Calculate the profit margin for year 2013.