Page 141 - Accounting Principles (A Business Perspective)

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2. Consumption of supplies on hand
3. The earning of ticket revenue
received in advance
4. The earning of interest on a bank
account
5. Salaries incurred by unpaid
Exercise P The following data regarding net income (loss) are for Perkins Parts, a medium-sized automotive
supplier, for the period 2004–2009.

Net Income Net Income
(Earnings) (Earnings)
($ millions) ($ millions)
1989 ...... ........... $ 860 1995 ........ .............. $ 4,139
1990 ...... ........... 3,835 1996 ........ .............. 4,446
1991 ...... ........... (2,258) 1997 ........ .............. 6,920
1992 ...... ........... (7,385) 1998 ........ .............. 22,071
1993 ...... ........... 2,529 1999 ........ .............. 7,237
1994 ...... ........... 5,308 2000 ........ .............. 3,467
Using 1989 as the base year, calculate the trend percentages, and comment on the results.
Problems
Problem A Among other items, the trial balance of Filmblaster, Inc., a movie rental company, at December 31
of the current year includes the following account balances:

Debits
Prepaid Insurance USD 10,000
Prepaid Rent USD 14,400
Supplies on Hand USD 2,800

Examination of the records shows that adjustments should be made for the following items:
a. Of the prepaid insurance in the trial balance, USD 4,000 is for coverage during the months after December 31
of the current year.
b. The balance in the Prepaid Rent account is for a 12-month period that started October 1 of the current year.
c. USD 300 of interest has been earned but not received.

d. Supplies used during the year amount to USD 1,800.
Prepare the annual year-end adjusting journal entries at December 31.
Problem B Marathon Magazine, Inc., has the following account balances, among others, in its trial balance at
December 31 of the current year:
Debits Credits
Supplies on Hand.................. $3,720
Prepaid Rent ......................... 7,200
Unearned Subscription Fees ... $15,000
Subscriptions Revenue........... 261,000
Salaries Expense ................... 123,000
• The inventory of supplies on hand at December 31 amounts to USD 720.
• The balance in the Prepaid Rent account is for a one-year period starting October 1 of the current year.
• One-third of the USD 15,000 balance in Unearned Subscription Fees has been earned.

Accounting Principles: A Business Perspective 142 A Global Text