1) Provided on the next page is the trial balance of the Skyland Golf Club, Inc. as of December 31, 2016. They prepare adjusting entries and close their books annually on December 31st. Create T-accounts (or general ledger accounts) for each account listed in the trial balance, and enter the balances from the trial balance into your T-accounts (or general ledger accounts) — and allow a few lines per account. (FYI: I recommend using T- accounts due to their simplicity, but the choice is yours.) In order to save paper, you can place multiple T- accounts (or ledger accounts) on a page. For ledger accounts you can use the standard account format as illustrated on page 88 or the T-account format illustrated on page 89 (and elsewhere). Note that you must create ONE (and only one) T-account (or general ledger account) for each and every account (i.e., do not create more than one Cash T-account, more than one Retained Earnings T-account, etc.). (You will use the same T-accounts for posting regular transactional entries, adjusting entries, and closing entries.) Also, to the extent possible, organize your T-accounts (or general ledger accounts) so that Assets are together, Liabilities are together, etc. (Please note that the assumption in this problem is that the regular (transactional) entries have ALREADY been recorded and posted to the T-accounts (or general ledger), and the trial balance below reflects that fact. (Therefore, you do not have to record the original journal entries that resulted in the balances shown in the trial balance — and in fact, there is no way that you would be able to figure out what those journal entries were just by looking at the trial balance, anyway.) Skyland Golf Club, Inc. Trial Balance December 31, 2016 Debit Credit Cash $ 140,000 Accounts Receivable 40,000 Allowance for Doubtful Accounts $ 1,000 Prepaid Insurance 48,000 Land 200,000 Buildings 900,000 Accumulated Depreciation of Buildings 200,000 Equipment 300,000 Accumulated Depreciation of Equipment 100,000 Common Stock 800,000 Retained Earnings 141,500 Dues Revenue 300,000 Greens Fee Revenue 775,500 Rent Revenue 220,000 Utilities Expense 230,000 Salaries and Wages Expense 400,000 Maintenance Expense 280,000 $ 2 538 000 $ 2 538 000 2) Assume the regular transactional entries for the year have already been recorded leading to the account balances in the trial balance above. However, assume that the following transactions were overlooked and not previously recorded by the company during the year. (These are regular transactional entries, not adjusting entries). Record the journal entries for these transactions and then post them to your T-accounts (or ledger). (record these in journal entry and then T account) a) On July 1, the company purchased supplies for $6,000, paying cash. The companys policy is to record the purchase of supplies in an expense account. b) On September 1, an additional building was purchased for $400,000 and additional equipment was purchased for $100,000. The company made a 20% down payment of the total purchase price, and signed a 1-year, 6% note payable for the remaining balance. c) On December 1, dividends of $10,000 are declared. (Note: Payment of the dividends will be made at a later date the following year. Hint: Be precise with the account name that is credited.) 3) Record the adjusting journal entries listed below (see letters a-j) and then post those adjusting entries to T-accounts (or the ledger). Create new accounts, as needed. (Again, the company prepares adjusting entries at year-end only.) Also, be sure to show your calculations (typed) for each item below that has an * next to it or there will be a deduction for each one. Those calculations can appear beneath or next to the entry or on a separate page. [Note: Adjusting entries should always be made in journal form first and then only after the journal entries are prepared should they be posted to T-accounts (ledger accounts). When your posting is complete, be sure to compute (show) ending balances in your T-accounts (or ledger accounts).] * a) The amount for prepaid insurance relates to a payment for two years of insurance coverage that was paid for on June 1st of the current year. The insurance coverage began on that date. * b) It is estimated that 10% of the accounts receivable will be uncollectible. * c) The rent revenue represents the amount received for 11 months for dining facilities. The same monthly amount is owed from customers for December, but that rent has not yet been received. (Note: Be specific/descriptive in the account name for the account debited in this entry.) d) Since the beginning of October, the company has had television and radio ads run at a cost of $2,000 per month. The company has yet to record or pay for any of these ads. e) Of the $300,000 of Dues Revenue on the trial balance, $40,000 of that amount is considered to be received in advance (i.e., services have not been performed for that portion, yet). f) Property taxes incurred but not yet paid amount to $25,000. (Be specific in both account names here.) g) Of the supplies purchased on July 1st in 2a) above, $2,000 worth are still on hand as of December 31st. * h) The building referred to in 2b) above has an estimated useful life of 30 years and an estimated salvage value of $40,000. Use the straight-line method to record depreciation for 2016. (Note: Assume for simplicity that depreciation was already recorded for all other buildings; you only have to record depreciation for this building.) * i) The equipment referred to in 2b) above has an estimated salvage value of $10,000 and is depreciated at a rate of 5% per year. Record depreciation for 2016. (Note: Assume depreciation was already recorded for all other equipment.) * j) Record the accrued interest on the note from the September 1st transaction from 2b) above. 4) Using your updated balances in your T-accounts (or ledger) prepare the year-end income statement, statement of retained earnings, and balance sheet for 2016. Be sure to use proper form in preparing your financial statements, including proper headings and dating of the financials. Page 161 (Single-Step Income Statement), p. 111 (Statement of Retained Earnings), and p. 112 (Balance Sheet) provide good examples to follow for this requirement (but obviously, you will have some different account names than the examples provided in the text). For your balance sheet, be sure to use your updated retained earnings balance from your statement of retained earnings since you have not prepared closing entries, yet. For your income statement, be sure to list each revenue and expense account, but do not worry about computing income tax expense. 5) Prepare closing entries (using compound entries where appropriate) and post them to your T-accounts (or ledger). Put these journal entries on a separate page from your adjusting journal entries and label them, Closing Entries. (When posting, be sure to create a T-account or ledger account for Income Summary.)
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