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1. On July 1, 2014, Seng Co. pays $17,100 to Nance Insurance Co. for a 1-year in

ID: 2480665 • Letter: 1

Question

1. On July 1, 2014, Seng Co. pays $17,100 to Nance Insurance Co. for a 1-year insurance contract. Both companies have fiscal years ending December 31.

-Journalize the entry on July 1 and the adjusting entry on December 31 for Nance Insurance Co. Nance uses the accounts Unearned Service Revenue and Service Revenue.

-Post the entry on July 1 and the adjusting entry on December 31 for Nance Insurance Co.

2. The bookkeeper for Beltran Company asks you to prepare the following accrual adjusting entries at December 31.

Salaries of $779 earned by employees have not been recorded.


Determine the company’s net earnings on an accrual basis for 2014.

* for this answer I got 35,410 - can you explain why its wrong?

1. On July 1, 2014, Seng Co. pays $17,100 to Nance Insurance Co. for a 1-year insurance contract. Both companies have fiscal years ending December 31.

-Journalize the entry on July 1 and the adjusting entry on December 31 for Nance Insurance Co. Nance uses the accounts Unearned Service Revenue and Service Revenue.

-Post the entry on July 1 and the adjusting entry on December 31 for Nance Insurance Co.

2. The bookkeeper for Beltran Company asks you to prepare the following accrual adjusting entries at December 31.

(a) Interest on notes payable of $452 is accrued. (b) Services performed but unbilled totals $1,848. (c)

Salaries of $779 earned by employees have not been recorded.

Explanation / Answer

Solution:

1. In the books of Nance Co.

July1, 2014 Seng Co $17,100

Unearned Service Revenue 17,100

(Being Service revenue received in advance for a 1 year term.)

Dec31, 2014 Unearned Service Revenue $8,550

Service Revenue 8,550

(Being services rendered for 6 months hence the same recorded as service revenue)

2.

(a) Interest on notes payable $452

Interest expense payable 452

On the date of payment following entry will be made:

Interest expense payable $452

Bank 452

(b) Accounts Receivable $1,848

Services performed 1,848

(c) Salary expense $779

Salary payable 779

(3) Cash earnings for 2014: $34,190

Add: Accounts Receivable $1020

Unpaid Wages 30 1,050

Less: Supplies on hand 370

Unpaid expenses 540 (910)

Net earnings on accrual basis 34,330

Working notes:

1. Accounts receivable $3,440 - $2,420 = $1,020

2. Supplies on hand $1,620 - $1,250 = $370

3. Unpaid wages $2,460 - $2,430 = $30

4. Unpaid exp $ 1,790 - 1,250 = $540