Q Student Name ___________________________________________ Date of Submission ____________________ ADJUSTING ENTRIES AND POSTING TO T-ACCOUNTS (PART 1) Prepare the required adjusting journal entry for each situation as of December 31 of the current year. See the last page for the unadjusted account balances shown in T-accounts. (a) Suppose Deana’s had received a $1,800 shipment of supplies in September of the current year. When counting the supplies on December 31 of the current year, Deana’s found only $800 worth of supplies on hand. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (b) Suppose Deana’s had paid $12,000 for six months’ rent on November 1 of the current year. As of December, 31 of the current year, two months’ (November & December) prepaid rent has expired. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (c) Suppose Deana’s had paid $6,000 for one year’s insurance on June 1 of the current year. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity ? (d) The company had acquired equipment costing $40,000 on January 1 of the current year. Suppose that the depreciation on this equipment was calculated to be $2,000 for the current year. Debit and credit the accounts affected. Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (e) On December 1 of the current year, the company had sold $500 in gift certificates for decorating services to a customer. On December 31 of the current year, the accountant received an envelope containing $400 worth of redeemed gift certificates, not yet recorded in the company’s books. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (f) Investments owned by the company earned $1,200 in additional interest revenue for the year; the cash will be received in January. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity ? (g) The company borrowed using a note payable from the bank for $30,000 on January 1 of the current year, due with all interest on June 30 of the following year. The note payable requires 10% interest. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (h) The company calculated its income taxes as $26,110 for the current year ended December 31. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity (i) On December 15 of the current year, the company declared a $750 dividend, payable January 15 of the following year. Debit and credit the accounts affected. Dec. 31 Ensure the equation still balances and debits = credits. Assets = Liabilities + Stockholders’ Equity Post the adjusting entries above to the T-accounts on the following page. ? Assets Liabilities Stockholders’ Equity, continued + Cash – Unadj. 43,450 + Accounts Receivable – Unadj. 4,000 + Interest Receivable – Unadj. 0 + Supplies – Unadj. 1,800 + Prepaid Insurance – Unadj. 6,000 + Prepaid Rent – Unadj. 12,000 + Equipment – Unadj. 40,000 – Accumulated Depr. + 0 Unadj. + Long-Term Investments – Unadj. 20,000 – Accounts Payable + 250 Unadj. – Dividend Payable + 0 Unadj. – Unearned Revenue + 500 Unadj. – Short-Term Notes Payable + 30,000 Unadj. – Interest Payable + 0 Unadj. – Income Taxes Payable + 0 Unadj. Stockholders’ Equity – Common Stock + 1,000 Unadj. – Additional Paid-In Capital + 9,000 Unadj. – Retained Earnings + 0 Unadj. – Decorating Revenue + 120,000 Unadj. – Interest Revenue + + Wage Expense – Unadj. 32,000 + Utilities Expense – Unadj. 1,000 + Telephone Expense – Unadj. 500 + Supplies Expense – + Rent Expense – + Insurance Expense – + Depreciation Expense – + Interest Expense – + Income Tax Expense – ? PREPARE AN ADJUSTED TRIAL BALANCE (Part 2) Use the adjusted balances from the T-accounts to prepare an adjusted trial balance for Deana’s Decorators as of December 31 of the current year (2018). Deana’s Decorators Adjusted Trial Balance December 31, 2018 Debit Credit Cash Accounts Receivable Interest Receivable Supplies Prepaid Insurance Prepaid Rent Equipment Accumulated Depreciation Long-Term Investments Accounts Payable Dividend Payable Unearned Revenue Short-Term Notes Payable Interest Payable Income Taxes Payable Common Stock ($1 par value) Additional Paid-in Capital Retained Earnings Decorating Revenue Investment Income Wage Expense Utilities Expense Telephone Expense Supplies Expense Rent Expense Insurance Expense Depreciation Expense Interest Expense Income Tax Expense Totals ? FINANCIAL STATEMENTS Use the balances from the trial balance to prepare (1) an income statement (multi-step) for Deana’s Decorators for the year ended December 31 of the current year and (2) a balance sheet (classified) as of December 31 of the current year (2018). Deana’s Decorators Income Statement For the year ended December 31, 2018 ? Deana’s Decorators Balance Sheet December 31, 2018 Assets Liabilities Stockholders’ Equity INTERPRETING THE FINANCIAL STATEMENTS (Part 3) Refer to the financial statements and calculate ratios below for each of the following categories for the current year (show all calculations and note instructor will provide additional data required): 1. Liquidity Current Ratio 2. Activity Average Collection Period Total Asset Turnover 3. Debt Debt Ratio Times Interest Earned 4. Profitability Net Profit Margin (NPM) Return of Assets (ROA) Return on Equity (ROE) Earnings Per Share (EPS) 5. Market Ratios Price/Earning (PE) Ratio Essay: Explain what each of the ten ratios mean and how each should be used to evaluate the financial health of the company (250-300 words). Financial Accounting Project Rubric 1 2 3 4 5 Unsatisfactory Beginning Developing Competent Accomplished Adjusting Entries (25%) Many errors and did not follow instructions. Completely inaccurate conclusions Some errors and followed most instructions Some accurate conclusions Few errors and followed mostly all instructions Mostly accurate conclusion Very few errors and followed all instructions Accurate and quality conclusions No errors and followed all instructions Accurate and high-quality conclusions T-Accounts (20%) Many errors and did not follow instructions. Completely inaccurate conclusions Some errors and followed most instructions Some accurate conclusions Few errors and followed mostly all instructions Mostly accurate conclusion Very few errors and followed all instructions Accurate and quality conclusions No errors and followed all instructions Accurate and high-quality conclusions Trial Balance (15%) Many errors and did not follow instructions. Completely inaccurate conclusions Some errors and followed most instructions Some accurate conclusions Few errors and followed mostly all instructions Mostly accurate conclusion Very few errors and followed all instructions Accurate and quality conclusions No errors and followed all instructions Accurate and high-quality conclusions Financial Statements (20%) Many errors and did not follow instructions. Completely inaccurate conclusions Some errors and followed most instructions Some accurate conclusions Few errors and followed mostly all instructions Mostly accurate conclusion Very few errors and followed all instructions Accurate and quality conclusions No errors and followed all instructions Accurate and high-quality conclusions Interpretations (20%) Many errors and did not follow instructions. Completely inaccurate conclusions Some errors and followed most instructions Some accurate conclusions Few errors and followed mostly all instructions Mostly accurate conclusion Very few errors and followed all instructions Accurate and quality conclusions No errors and followed all instructions Accurate and high-quality conclusions