PART A (24 Points) In the journal for McBride Company provided below, record the appropriate adjusting entries as of December 31. Please note that McBride Company has not prepared any adjusting entries for the current year prior to December 31.
a. The Store Supplies account showed a beginning balance of $300 and purchases of $700. Unused store supplies at the end of the year were counted and totaled $200.
b. On December 1, the company paid three months rent in advance, debiting Prepaid Rent for $2,100.
c. Equipment purchased January 1 of the current year for $16,000 was estimated to have a useful life of 4 years with no salvage value.
d. Wages are paid each Friday for a 5-day week. The salary is set at a fixed rate of $1,000 per day, and the accounting period ended on Tuesday.
e. On November 1, the company accepted a $15,000, 12%, 6-month Note Receivable. An adjusting entry should be made to accrue the interest on this note.
f. The balance in Unearned Commissions Revenue at December 31, is $1,800. This represents a customer deposit for which one-half has been earned as of December 31.
McBRIDE COMPANY GENERAL JOURNAL
PART B (30 Points)
Below is an Adjusted Trial Balance for Brown Company for the year ended December 31. In the space provided on the next two pages:
Required: a. Record the appropriate closing entries in the general journal below. b. Prepare a Post-Closing Trial Balance on the form provided below.
Adjusted Trial Balance
December 31, 20xx
Accumulated Depreciation, Office Equipment
C.R. Brown, Capital
C.R. Brown, Drawing
BROWN COMPANY GENERAL JOURNAL
Post-Closing Trial Balance
December 31, 20xx
PART C (16 Points)
Required: For EACH of the two questions below, write at least one full paragraph in response to the question asked. Be sure each of your paragraphs had a topic sentence. Please pay attention to your spelling, grammar and punctuation. Do not plagiarize from your textbook or any other source. Be sure your answers are in your own words.
1. Journalizing and posting closing entries are required steps in the accounting cycle. Discuss why it is necessary to close the books at the end of an accounting period. If closing entries were not made, how would the preparation of financial statements be affected?
2. The long-term liability section of Omega Company’s Balance Sheet includes the following accounts:
Total long-term liabilities
Omega Company is an established company and does not experience any financial difficulties or have any cash flow problems. Identify at least two items in the long-term liability section that are questionable and explain where the placement on the balance sheet would be more appropriate and why.
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