50) Delphi Desk, Inc. has the following unadjusted balances at December 31, 2011:
1.
|
Accounts payable
|
$4,168
|
|
4.
|
Rental income
|
$ 4,200
|
2.
|
Interest income
|
2,475
|
|
5.
|
Salaries expense
|
12,000
|
3.
|
Prepaid insurance
|
5,000
|
|
|
|
|
Part A:
In the worksheet below, record the effect of these five adjustments on the accounting equation for the year ended December 31, 2011. Show the correct dollar amounts, and write in the titles of the accounts affected.
1. $1,000 of the prepaid insurance has now expired
2. $3,200 of the rental income has not yet been earned.
3. The company must accrue $1,250 of salaries expense.
4. The company received a $300 bill for merchandise received in late December but not yet recorded.
5. The company has earned $300 of interest income, not yet received or recorded.
Assets
|
Liabilities
|
Shareholders’ equity
|
|
|
CC
|
Retained earnings
|
1
|
|
|
|
|
|
2
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Part B:
Fill in the adjusted balances as of December 31, 2011. Some of the accounts that have been adjusted are not included in this table.
1.
|
Accounts payable
|
$
|
|
4.
|
Rental income
|
$
|
2.
|
Interest income
|
$
|
|
5.
|
Salaries expense
|
$
|
3.
|
Prepaid insurance
|
$
|
|
|
|
|
51) On October 1, 2009 CW Oil Drilling Company paid $2,400,000 for a two-year insurance policy that covers all of its drilling equipment around the world. The company recorded the purchase as prepaid insurance. Complete the chart below:
|
Cash paid
|
Insurance
expense
|
Prepaid
insurance
|
Year ended Dec. 31, 2009
|
$
|
$
|
$
|
Year ended Dec. 31, 2010
|
$
|
$
|
$
|
Year ended Dec. 31, 2011
|
$
|
$
|
$
|
52) Ima Hogg wants to borrow money to expand her business. Her plan is to open a new store on each of the major islands in the Caribbean. She knows that her bank will want to see a full set of this year’s financial statements before agreeing to lend the company money. Ima tells the company accountant, Tom Trueheart, to double the useful lives of all of the company’s equipment before he prepares the financial statements this year.
1. What effect will doubling the useful lives for all of the equipment have on this year’s income statement? How will the balance sheet be affected? Why would Ima Hogg ask Tom Trueheart to do this?
2. Would it be ethical for Tom to do as Ima asks? Why?