Misc. Accounting Problems

1.  In analyzing the accounts of Porsha Corporation, the adjusting data listed below are determined on December 31, the end of an annual fiscal period.     
a)  The prepaid insurance account shows a debit of $4,800, representing the cost of a 2-year fire insurance policy purchased and dated July 1.  Therefore, the insurance policy needs to be adjusted to show the amount of insurance that still "prepaid" at the end of the year.      
     
b)  On September 1, Rent Revenue was credited for $5,750, representing revenue from subrental for a 5-month period beginning on that date.  At the end of the year, the 5 month contract has not been fulfilled.  The adjustment needs to correct the amount of revenue actually earned during the year.   
      
c)  Purchase of advertising materials for $2,475 during the year was recorded in the advertising expense account.  On December 31, advertising materials costing $475 are on hand. Adjust the expense and prepaid amount to show the actual amount on hand.      
      
d)  On November 1, $3,000 was paid for rent for a 5-month period beginning on that date.  2 months have been used as of the end of the year.   
  
e)  Miscellaneous Office Expense was debited for office supplies of $1,350 purchased during the year.  On December 31, office supplies of $250 are on hand.  Adjust the expense and prepaid amount to show the actual amount on hand.      
      
a)  The prepaid insurance account shows a debit of $4,800, representing the cost of a 2-year fire insurance policy purchased and dated July 1.  Therefore, the insurance policy needs to be adjusted to show the amount of insurance that still "prepaid" at th      
      
Required:      
Give the adjusting entry for each item above.      

2.  The following information relates to ending balances of Stardust Company at the end of 2014:     
     
 2014    
Accounts Payable  89,000     
Accounts Receivable  64,500     
Accumulated Depreciation - Buildings  57,000     
Allowance for Bad Debts  4,000     
Bad Debt Expense  2,800     
Buildings  119,000     
Capital Stock  300,000     
Cash   44,000     
Cost of Goods Sold  680,000     
Depreciation Expense  12,000     
Discontinued operations (loss from disposal)  40,000     
Extraordinary Gain  34,000     
Income Tax Expense  12,000     
Insurance Expense  16,000     
Interest Expense  19,500     
Interest Payable  30,000     
Intangible Assets  97,000     
Inventory  245,000     
Land  180,000     
Long-term Investments  75,000     
Mortgage Payable  210,000     
Office Expenses  34,000     
Prepaid Insurance  3,400     
Retained Earnings (at end of year)  136,250     
Salaries Expense  99,000     
Sales  950,000     
Sales Returns  24,500     
Selling Expenses  49,000     
Selling Expenses Payable  1,650     
Supplies Expense  38,500     
Tax Expense - Real Estate & Payroll  16,000     
     
Number shares outstanding at end of year  4,200     
Market value per share at end of year  $16.50     
     
     
1.  Prepare a classified balance sheet for Stardust Company for 2014.     
2.  Prepare a multiple-step income statement for Stardust Company for 2014.     
3.  Prepare the following calculations (show your work):     
A.  Current ratio     
B.  Debt ratio     
C.  Return on assets     
D.  Return on equity     
E.  Earnings per share     
F.  Price-earnings ratio

3.  The following statement is provided to assist you in preparation of the cash flow statement:       
       
Bunker Hill Company       
Balance Sheets       
2014 and 2013       
       
       
  12/31/2014  12/31/2013   
Cash and cash equivalents   498,000    675,000    
Accounts receivable   455,500    345,000    
Inventory   750,000    654,000    
Prepaid insurance   4,500    6,000    
Buildings and equipment   5,515,500    4,350,000    
Accumulated depreciation    (2,235,000)   (1,995,000)   
Total assets   4,988,500    4,035,000    
       
Accounts payable   688,500    945,000    
Salaries payable   75,000    105,000    
Notes payable - bank (current)   150,000    600,000    
Notes payable - bank (long-term)   1,500,000    -      
Common stock   2,400,000    2,400,000    
Retained earnings (deficit)   175,000    (15,000)   
Total liabilities & equity   4,988,500    4,035,000    
       
       
Notes:       
Cash needed to purchase new equipment and to improve the company's working capital position was raised by borrowing from the bank with a long term note.       
       
Equipment costing $75,000 with a book value of $15,000 was sold for $18,000 - the gain was included in net income.       
The company paid cash dividends of $90,000.       
The company had net income of $280,000 for the year.       
       
Instructions:       
Prepare a statement of cash flows using the indirect method for 2013.  Use the format below.       
Hint:  don't forget to calculate depreciation expense (difference between Accum depreciation PY and CY + any accum depreciation on equipment sold during the year:  cost less book value).  Purchase of buildings & equipment - don't forget the cost of equipment sold during the year (given to you).       
4.  Because of the extreme deterioration in the financial condition of a customer, the customer's account in the amount of $7,500 was written off as uncollectible on July 23.  by November 1, the customer's financial condition had improved such that the customer was able to pay the account in full.  Make the journal entries necessary to write the account off on July 23 and  then to record the collection of the account on November 1.    
5.  Historically, warranty expenditures have been equal to 5% of sales.  Total sales for the year were $500,000.  Actual warranty repairs made during the year total $27,500.  Make the necessary journal entries to record this warranty-related information.        
        
 6.  Moreheart Construction Co has the following contract:       
  Contract term   3 years     
  Total contract    3,300,000     
      
   Costs   Billings    Collections   
 2014  1,144,000   1,100,000   880,000   
 2015  1,001,000   990,000   935,000   
 2016  715,000   1,210,000   1,485,000   
 % Completed to date 40% 75% 100%  
      
 Prepare the journal entries to record the costs incurred, the billings and the cash collections for each year. (Use the shaded cells for your inputs)       
7.  A.  Rider Corporation sells merchandise on the installment sales basis and the uncertainty of cash collection make the use of the installment sales method necessary.  The following data relate to 3 years operations.           
         
A.  Calculate gross profit and gross profit percentage for use in the journal entries below.         
B.  Prepare the journal entries during the year and at the end of the year to for the following:  record the sales, record the cost of sales, record the cash collections, record the deferred gross profit, record the realized gross profit.  Note: yellow shaded cells are your input cells