Presented below is information related to ivan calderon corp. for the year 2014.

E3-4.

(Corrected Trial Balance)

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4

The trial balance of Watteau Co. does not balance.

WATTEAU CO.

Trial Balance

June 30, 2014

Debit

Credit

Cash

$ 2,870

Accounts Receivable

$ 3,231

Supplies

800

Equipment

3,800

Accounts Payable

2,666

Unearned Service Revenue

1,200

Common Stock

6,000

Retained Earnings

3,000

Service Revenue

2,380

Salaries and Wages Expense

3,400

Office Expense

940

$13,371

$16,916

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

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1.

Cash received from a customer on account was debited for $570, and Accounts Receivable was credited for the same amount. The actual collection was for $750.

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2.

The purchase of a computer printer on account for $500 was recorded as a debit to Supplies for $500 and a credit to Accounts Payable for $500.

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3.

Services were performed on account for a client for $890. Accounts Receivable was debited for $890 and Service Revenue was credited for $89.

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4.

A payment of $65 for telephone charges was recorded as a debit to Office Expense for $65 and a debit to Cash for $65.

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5.

When the Unearned Service Revenue account was reviewed, it was found that service revenue amounting to $325 was performed prior to June 30 (related to Unearned Service Revenue).

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6.

A debit posting to Salaries and Wages Expense of $670 was omitted.

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7.

A payment on account for $206 was credited to Cash for $206 and credited to Accounts Payable for $260.

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8.

A dividend of $575 was debited to Salaries and Wages Expense for $575 and credited to Cash for $575.

Instructions

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

E3-6.

(Adjusting Entries)

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Karen Weller, D.D.S., opened a dental practice on January 1, 2014. During the first month of operations, the following transactions occurred.

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1.

Performed services for patients who had dental plan insurance. At January 31, $750 of such services was performed but not yet billed to the insurance companies.

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2.

Utility expenses incurred but not paid prior to January 31 totaled $520.

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3.

Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable. The equipment depreciates $400 per month. Interest is $500 per month.

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4.

Purchased a one-year malpractice insurance policy on January 1 for $12,000.

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5.

Purchased $1,600 of dental supplies. On January 31, determined that $500 of supplies were on hand.

Instructions

Prepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Accounts Payable.

(Prepare Financial Statements)

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The adjusted trial balance of Anderson Cooper Co. as of December 31, 2014, contains the following.

ANDERSON COOPER CO.

Adjusted Trial Balance

December 31, 2014

Account Titles

Dr.

Cr.

Cash

$19,472

Accounts Receivable

6,920

Prepaid Rent

2,280

Equipment

18,050

Accumulated Depreciation—Equipment

$ 4,895

Notes Payable

5,700

Accounts Payable

5,472

Common Stock

20,000

Retained Earnings

11,310

Dividends

3,000

Service Revenue

11,590

Salaries and Wages Expense

6,840

Rent Expense

2,260

Depreciation Expense

145

Interest Expense

83

Interest Payable

83

$59,050

$59,050

Instructions

(a)

Prepare an income statement.

(b)

Prepare a statement of retained earnings.

(c)

Prepare a classified balance sheet.

*E3-19.

(Cash and Accrual Basis)

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Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2013, 2014, and 2015.

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Instructions

(a)

Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the cash basis.

(b)

Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the accrual basis.

P3-6.

(Adjusting Entries and Financial Statements)

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6

The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer.

YORKIS PEREZ, CONSULTING ENGINEER

Trial Balance

December 31, 2014

Debit

Credit

Cash

$ 29,500

Accounts Receivable

49,600

Allowance for Doubtful Accounts

$   750

Inventory

1,960

Prepaid Insurance

1,100

Equipment

25,000

Accumulated Depreciation—Equipment

6,250

Notes Payable

7,200

Owner's Capital

35,010

Service Revenue

100,000

Rent Expense

9,750

Salaries and Wages Expense

30,500

Utilities Expenses

1,080

Office Expense

720

$149,210

$149,210

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1.

Fees received in advance from clients $6,000.

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2.

Services performed for clients that were not recorded by December 31, $4,900.

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3.

Bad debt expense for the year is $1,430.

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4.

Insurance expired during the year $480.

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5.

Equipment is being depreciated at 10% per year.

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6.

Yorkis Perez gave the bank a 90-day, 10% note for $7,200 on December 1, 2014.

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7.

Rent of the building is $750 per month. The rent for 2014 has been paid, as has that for January 2015.

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8.

Office salaries and wages earned but unpaid December 31, 2014, $2,510.

Instructions

(a)

From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2014. (Omit explanations.)

(b)

Prepare an income statement for 2014, a statement of owner's equity, and a classified balance sheet. Yorkis Perez withdrew $17,000 cash for personal use during the year.

P3-9.

(Adjusting and Closing)

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5

6

7

Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.

CRESTWOOD GOLF CLUB, INC.

Trial Balance

December 31

Debit

Credit

Cash

$ 15,000

Accounts Receivable

13,000

Allowance for Doubtful Accounts

$  1,100

Prepaid Insurance

9,000

Land

350,000

Buildings

120,000

Accumulated Depreciation—Buildings

38,400

Equipment

150,000

Accumulated Depreciation—Equipment

70,000

Common Stock

400,000

Retained Earnings

82,000

Dues Revenue

200,000

Green Fees Revenue

5,900

Rent Revenue

17,600

Utilities Expenses

54,000

Salaries and Wages Expense

80,000

Maintenance and Repairs Expense

24,000

$815,000

$815,000

Instructions

(a)

Enter the balances in ledger accounts. Allow five lines for each account.

(b)

From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)

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1.

The buildings have an estimated life of 30 years with no salvage value (straight-line method).

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2.

The equipment is depreciated at 10% per year.

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3.

Insurance expired during the year $3,500.

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4.

The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.

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5.

It is estimated that 12% of the accounts receivable will be uncollectible.

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6.

Salaries and wages earned but not paid by December 31, $3,600.

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7.

Dues received in advance from members $8,900.

(c)

Prepare an adjusted trial balance.

(d)

Prepare closing entries and post.

P3-8.

(Adjusting Entries and Financial Statements)

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6

Vedula Advertising Agency was founded by Murali Vedula in January 2009. Presented are both the adjusted and unadjusted trial balances as of December 31, 2014.

VEDULA ADVERTISING AGENCY

Trial Balance

December 31, 2014

Unadjusted

Adjusted

Dr.

Cr.

Dr.

Cr.

Cash

$ 11,000

$ 11,000

Accounts Receivable

16,000

19,500

Supplies

9,400

6,500

Prepaid Insurance

3,350

1,790

Equipment

60,000

60,000

Accumulated Depreciation—Equipment

$ 25,000

$ 30,000

Notes Payable

8,000

8,000

Accounts Payable

2,000

2,000

Interest Payable

0

560

Unearned Service Revenue

5,000

3,100

Salaries and Wages Payable

0

820

Common Stock

20,000

20,000

Retained Earnings

5,500

5,500

Dividends

10,000

10,000

Service Revenue

57,600

63,000

Salaries and Wages Expense

9,000

9,820

Insurance Expense

1,560

Interest Expense

560

Depreciation Expense

5,000

Supplies Expense

2,900

Rent Expense

4,350

4,350

$123,100

$123,100

$132,980

$132,980

Instructions

(a)

Journalize the annual adjusting entries that were made.

(b)

Prepare an income statement and a retained earnings statement for the year ended December 31, and a classified balance sheet at December 31.

(c)

Identify which accounts should be closed on December 31.

(d)

If the note has been outstanding 10 months, what is the annual interest rate on that note?

(e)

If the company paid $10,500 in salaries and wages in 2014, what was the balance in Salaries and Wages Payable on December 31, 2013?

CA1-15.

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(Financial Reporting Pressures)

Presented below is abbreviated testimony from Troy Normand in the WorldCom case. He was a manager in the corporate reporting department and is one of five individuals who pleaded guilty. He is testifying in hopes of receiving no prison time when he is ultimately sentenced.

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Q.

Mr. Normand, if you could just describe for the jury how the meeting started and what was said during the meeting?

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A.

I can't recall exactly who initiated the discussion, but right away Scott Sullivan acknowledged that he was aware we had Problems with the entries, David Myers had informed him, and we were considering resigning.

He said that he respected our concerns but that we weren't being asked to do anything that he believed was wrong. He mentioned that he acknowledged that the company had lost focus quite a bit due to the preparations for the Sprint merger, and that he was putting plans in place and projects in place to try to determine where the Problems were, why the costs were so high.

He did say he believed that the initial statements that we produced, that the line costs in those statements could not have been as high as they were, that he believed something was wrong and there was no way that the costs were that high.

I informed him that I didn't believe the entry we were being asked to do was right, that I was scared, and I didn't want to put myself in a position of going to jail for him or the company. He responded that he didn't believe anything was wrong, nobody was going to be going to jail, but that if it later was found to be wrong, that he would be the person going to jail, not me.

He asked that I stay, don't jump off the plane, let him land it softly, that's basically how he put it. And he mentioned that he had a discussion with Bernie Ebbers, asking Bernie to reduce projections going forward and that Bernie had refused.

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Q.

Mr. Normand, you said that Mr. Sullivan said something about don't jump out of the plane. What did you understand him to mean when he said that?

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A.

Not to quit.

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Q.

During this meeting, did Mr. Sullivan say anything about whether you would be asked to make entries like this in the future?

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A.

Yes, he made a comment that from that point going forward we wouldn't be asked to record any entries, high-level late adjustments, that the numbers would be the numbers.

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Q.

What did you understand that to be mean, the numbers would be the numbers?

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A.

That after the preliminary statements were issued, with the exception of any normal transaction, valid transaction, we wouldn't be asked to be recording any more late entries.

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Q.

I believe you testified that Mr. Sullivan said something about the line cost numbers not being accurate. Did he ask you to conduct any analysis to determine whether the line cost numbers were accurate?

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A.

No, he did not.

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Q.

Did anyone ever ask you to do that?

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A.

No.

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Q.

Did you ever conduct any such analysis?

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A.

No, I didn't.

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Q.

During this meeting, did Mr. Sullivan ever provide any accounting justification for the entry you were asked to make?

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A.

No, he did not.

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Q.

Did anything else happen during the meeting?

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A.

I don't recall anything else.

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Q.

How did you feel after this meeting?

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A.

Not much better actually. I left his office not convinced in any way that what we were asked to do was right. However, I did question myself to some degree after talking with him wondering whether I was making something more out of what was really there.

Instructions

Answer the following questions.

(a)

What appears to be the ethical issue involved in this case?

(b)

Is Troy Normand acting improperly or immorally?

(c)

What would you do if you were Troy Normand?

(d)

Who are the major stakeholders in this case?