Generally Accepted Accounting Principles and Cash

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financial accountingBBUS 2210
CHAPTER 3
JOURNAL ENTRIES AND ADJUSTING JOURNAL ENTRIES
EXTRA PROBLEMS

DAILY JOURNAL ENTRIES

Model trains for sale to toy stores are produced by Whistle Stop Incorporated, a small manufacturing company. Whistle Stop also has a small service department that repairs customers’ model trains for a fee. The company has been in business for five years. At the end of the most recent fiscal year, November 30, 2011, the accounting records reflected total assets of $500,000 and total liabilities of $200,000. During the current fiscal year ending November 30, 2012, the following summarized events occurred:

a. Issued additional common shares for $200,000.
b. Borrowed $120,000 cash from the bank and signed a 10-year promissory note. c. Built an addition on the factory for $200,000 and paid cash to the contractor. d. Purchased equipment for the new addition for $30,000, paying $3,000 in cash and signing a note due in six months for the balance. e. Returned a $3,000 piece of equipment, from (d), because it proved to be defective; receiving a reduction of the note payable. f. Performed repairs on model trains for customers for $2,500. The customers paid for the repairs in cash. g. Purchased a delivery truck for $10,000; paid $5,000 cash and signed a nine-month note for the remainder. h. A shareholder sold $5,000 worth of his shares in Whistle Stop Incorporated to his neighbour. i. Repaid $25,000 cash on the bank note borrowed in (b). j. Performed repairs on model trains for customers for $3,000 on account. k. Purchased office equipment for $1,000; paying cash. l. Paid a $15,000 cash dividend to the shareholders.

m. Purchased supplies for $30,000 on account.

Whistle Stop Incorporated|
General Journal|
Page 1|
a.| Cash| 200,000| |
| Common shares| | 200,000|
b.| Cash| 120,000| |
| Long-term Note payable| | 120,000|
c.| Factory| 200,000| |
| Cash| | 200,000|
d.| Equipment| 30,000| |
| Cash| | 3,000|
| Short-term Note payable| | 27,000|
e.| Short-termNote payable| 3,000| |
| Equipment| | 3,000|
f.| Cash| 2,500| |
| Service revenue| | 2,500|
g.| Delivery truck| 10,000| |
| Cash| | 5,000|
| Short-term Note payable| | 5,000|
h.| Not a transaction| | |
i.| Long-term Note payable| 25,000| |
| Cash| | 25,000|

Whistle Stop Incorporated|
General Journal|
Page 2|
j.| Accounts receivable| 3,000| |
| Service revenue| | 3,000|
k.| Office equipment| 1,000| |
| Cash| | 1,000|
l. | Dividends| 15,000| |
| Cash| | 15,000|
m.| Supplies| 30,000| |
| Accounts payable| | 30,000|
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ADJUSTING JOURNAL ENTRIES

Brokeback Towing Company is at the end of its fiscal year, December 31, 2012. The following data that must be considered were developed from the company’s records and related documents:

a. On July 1, 2012, a three-year insurance premium on equipment in the amount of $600 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1. b. At the end of 2012, the unadjusted balance in the Office Supplies account was $1,000. A physical count of supplies on December 31, 2012, indicated supplies costing $300 were still on hand. c. On December 31, 2012, YY’s Garage completed repairs on one of Brokeback’s trucks at a cost of $800. The amount is not yet recorded. It will be paid during January 2013. d. Cash of $4,200 was collected on November 1, 2012, for contract services to be rendered evenly over the next year, beginning on November 1. Unearned Contract Revenue was credited when the cash was received. Some...
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