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E3-21 Comprehensive Exercise [LO2, LO3, LO4, LO5] Vanishing Games Corporation (V

ID: 2357184 • Letter: E

Question

E3-21 Comprehensive Exercise [LO2, LO3, LO4, LO5]

Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $14. At the start of 2010, VGC's income statement accounts had zero balances and its balance sheet account balances were as follows:



Cash $ 1,513,000
Accounts Receivable 157,000
Supplies 15,900
Equipment 892,500
Land 1,202,000
Building 423,300
Accounts Payable 106,400
Unearned Revenue 179,800
Notes Payable (due 2013) 58,800
Contributed Capital 2,440,000
Retained Earnings 1,418,700

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In addition to the above accounts, VGC's chart of accounts includes the following: Subscription Revenue, Licensing Revenue, Wages Expense, Advertising Expense, and Utilities Expense.


rev: 03-02-2011
references
Section Break E3-21 Comprehensive Exercise [LO2, LO3, LO4, LO5]




1.value:
3 points E3-21 Requirement 1

Requirement 1:
Analyze the effect of the January 2010 transactions (shown below) on the accounting equation and effect (+ for increase and - for decrease) of each transaction. (Leave no cells blank; if no effect, select "NE".)


a. Received $51,000 cash from customers for subscriptions that had already been earned in 2009.

b. Received $25,800 cash from Electronic Arts, Inc., for licensing revenue earned in the month of January 2010.

c. Purchased 10 new computer servers for $34,700; paid $10,300 cash and signed a three year note for the remainder owed.

d. Paid $10,800 for an Internet advertisement run on Yahoo! in January 2010.
e. Sold 15,200 monthly subscriptions at $14 each for services provided during the month of January 2010. Half was collected in cash and half was sold on account.

f. Received an electric and gas utility bill for $5,370 for January 2010 utility services. The bill will be paid in February.

g. Paid $378,200 in wages to employees for work done in January 2010.
h. Purchased $3,120 of supplies on account.
i. Paid $3,120 cash to the supplier in (h).

Requirement 2:
Prepare journal entries for the January 2010 transactions listed in requirement 1. (Omit the "$" sign in your response.)


3.Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts

Explanation / Answer