Chapter 3: Question 5BE (page 128)
BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.
The amount of prepaid insurance used is $150,000.
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BE3-3 (L02,3) On July 1, 2017, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31
EXCEL (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.
Debit Credit
Prepaid Insurance \(3,600
Supplies \)2,800
Equipment \(25,000
Accumulated Depreciation- Equipment \)8,400
Notes Payable \(20,000
Unearned Rent Revenue \)9,300
Rent Revenue \(60,000
Interest Expenses -0-
Salaries and Wages Expenses \)14,000
An analysis of accounts shows the following.
The equipment depreciates \(250 per month.
One-third of the unearned rent was recognized as revenue during the quarter.
Interest of \)500 is accrued on the notes payable.
Supplies on hand total \(850
Insurance expires at the rate of \)300 per month.
Instructions
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expenses, Insurance Expenses, Interest Payable, and Supplies expenses. (Omit Explanations)
Kellogg Company has its headquarters in Battle Creek, Michigan. The company manufactures and sells ready-to-eat breakfast cereals and convenience foods including cookies, toaster pastries, and cereal bars.
Selected data from Kellogg Company’s 2014 annual report follows (dollar amounts in millions).
2014 | 2013 | 2012 | |
Sales | \(14,580 | \)14,792 | $14,197 |
Gross profit % | 34.73% | 41.26% | 38.28% |
Operating profit | 1,024 | 2,837 | 1,562 |
Net cash flow less capital expenditure | 1,211 | 1,170 | 1,225 |
Net earnings | 633 | 1,808 | 961 |
In its annual reports, Kellogg Company has indicated that it plans to achieve sustainability of its operating results with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. Kellogg believes its steady earnings growth, strong cash flow, and continued investment during a multi-year period demonstrates the strength and flexibility of its business model.
Instructions
(a) Compute the percentage change in sales, operating profit, net cash flow less capital expenditures, and net earnings from year to year for the years presented.
(b) Evaluate Kellogg’s performance. Which trend seems most favorable? Which trend seems least favorable? What are the implications of these trends for Kellogg’s sustainable performance objectives? Explain.
E3-6 (L03) (Adjusting Entries) Karen Weller, D.D.S., opened a dental practice on January 1, 2017. During the first month ofoperations, the following transactions occurred.1. Performed services for patients who had dental plan insurance. At January 31, \(750 of such services was performed but notyet billed to the insurance companies.2. Utility expenses incurred but not paid prior to January 31 totaled \)520.3. Purchased dental equipment on January 1 for \(80,000, paying \)20,000 in cash and signing a \(60,000, 3-year note payable.The equipment depreciates \)400 per month. Interest is \(500 per month.4. Purchased a one-year malpractice insurance policy on January 1 for \)12,000.5. Purchased \(1,600 of dental supplies. On January 31, determined that \)500 of supplies were on hand.InstructionsPrepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—Equipment,Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, PrepaidInsurance, Supplies, Supplies Expense, Utilities Expenses, and Accounts Payable.
Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’s first IFRS financial statements?
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