Revenue and Expenses 1. Recognition of concepts. Ron Carroll operates a small co

Revenue and Expenses 1. Recognition of concepts. Ron Carroll operates a small company that books enter tainers for theaters parties conventions and so forth. The company s fiscal year ends on June 30. Consider the following items and classify each as either (1) pre paid expense (2) unearned revenue (3) accrued expense (4) accrued revenue or (5) none of the foregoing.a. Amounts paid on June 30 for a 1-year insurance policyb. Professional fees earned but not billed as of June 30c. Repairs to the firm s copy machine incurred and paid in Juned. An advance payment from a client for a performance next month at a conventione. The payment in part (d) from the client s point of viewf. Interest owed on the company s bank loan to be paid in early Julyg. The bank loan payable in part (f)h. Office supplies on hand at year-end2. Analysis of prepaid account balance. The following information relates to Action Sign Company for 20X2:Compute the balance in the Prepaid Insurance account on January 1 20X2.3. Understanding the closing process. Examine the following list of accounts:Which of the preceding accountsa. appear on a post-closing trial balance?b. are commonly known as temporary or nominal accounts?c. generate a debit to Income Summary in the closing process?d. are closed to the capital account in the closing process?4. Adjusting entries and financial statements. The following information pertains to Fixation Enterprises:Fixation s accounting year ends on December 31.InstructionsAnalyze the five preceding cases individually and determine the following:a. The typeof adjusting entry needed at year-end (Use the following codes: A adjust ment of a prepaid expense; B adjustment of an unearned revenue; C adjustment to record an accrued expense; or D adjustment to record an accrued revenue.)b. The year-end journal entry to adjust the accountsc. The income statement impact of each adjustment (e.g. increases total revenues by $500)5. Adjusting entries. You have been retained to examine the records of Kathy s Day Care Center as of December 31 20X3 the close of the current reporting period. In the course of your examination you discover the following:$540912840InstructionsThe center s accounts were last adjusted on December 31 20X2. Prepare the adjusting entries necessary under the accrual basis of accounting.6. Bank reconciliation and entries. The following information was taken from the accounting records of Palmetto Company for the month of January:Instructions:a. Prepare Palmetto s January bank reconciliation.b. Prepare any necessary journal entries for Palmetto.7. Direct write-off method. Harrisburg Company which began business in early 20X7 reported $40000 of accounts receivable on the December 31 20X7 balance sheet. Included in this amount was $550 for a sale made to Tom Mattingly in July. On January 4 20X8 the company learned that Mattingly had filed for personal bankruptcy. Harrisburg uses the direct write-off method to account for uncollectibles.a. Prepare the journal entry needed to write off Mattingly s account.b. Comment on the ability of the direct write-off method to value receivables on the year-end balance sheet.8. Allowance method: estimation and balance sheet disclosure. The following pre- adjusted information for the Maverick Company is available on December 31:a. Prepare the journal entries necessary to record Maverick s uncollectible accounts expense under each of the following assumptions:(1) Uncollectible accounts are estimated to be 5% of Credit Sales.(2) Uncollectible accounts are estimated to be 14% of Accounts Receivable.b. How would Maverick s Accounts Receivable appear on the December 31 balance sheet under assumption (1) of part (a)?c. How would Maverick s Accounts Receivable appear on the December 31 balance sheet under assumption (2) of part (a)?9. Direct write-off and allowance methods: matching approach. The December 31 20X2 year-end trial balance of Targa Company revealed the following account information:Instructionsa. Determine the adjusting entry for bad debts under each of the following condi tions:(1) An aging schedule indicates that $12420 of accounts receivable will be uncollectible.(2) Uncollectible accounts are estimated at 2% of net sales.b. On January 19 20X3 Targa learned that House Company a customer had declared bankruptcy. Present the proper entry to write off House s $950 balance using the allowance method.c. Repeat the requirement in part (b) using the direct write-off method.d. In light of the House bankruptcy examine the allowance and direct write-off methods in terms of their ability to properly match revenues and expenses.10. Allowance method: analysis of receivables. At a January 20X2 meeting the presi dent of Sonic Sound directed the sales staff to move some product this year. The president noted that the credit evaluation department was being disbanded be cause it had restricted the company s growth. Credit decisions would now be made by the sales staff.By the end of the year Sonic had generated significant gains in sales and the president was very pleased. The following data were provided by the accounting department:The $12444000 receivables balance was aged as follows:Assume that no accounts were written off during 20X2.Instructionsa. Estimate the amount of Uncollectible Accounts as of December 31 20X2.b. What is the company s Uncollectible Accounts expense for 20X2?c. Compute the net realizable value of Accounts Receivable at the end of 20X1 and 20X2.d. Compute the net realizable value at the end of 20X1 and 20X2 as a percentage of respective year-end receivables balances. Analyze your findings and comment on the president s decision to close the credit evaluation department.