The review will be held SUNDAY February 23rd from 3 to 6 PM in Woodruff Auditorium of the Kansas Union Complete this packet prior to attending the review Short Answer 1 State the fundamental accounting equation 2 What are the two components of stockholder s equity 3 What is the formula for current ratio quick ratio debt ratio and working capital 4 What is the group that presently creates accounting standards 5 What gives the board of directors the right to change a company s CEO 6 What three things do you need to recognize revenue according to the revenue recognition concept 7 What is the purpose of adjusting entries 8 What is the revenue concept and the matching concept 1 9 When do you recognize revenues and expenses under cash and accrual accounting 10 When can you use reversing entries 11 Where do we close dividends to 12 What is double taxation 2 Adjusting Entries Caty started her own pet store specializing in Siberian Huskies Make the appropriate entries for the transactions described below Caty closes her books on December 31 1 On Jan 1 Caty sold common stock in the amount of 100 000 cash 2 On March 31 Caty purchases a giant dog washing machine The machine cost 250 000 Caty paid 100 000 cash and signed a note for the remaining amount Interest of 10 is compounded annually and due in 1 year The machine has a useful life of 10 years 3 On August 1 Caty paid cash for prepaid insurance in the amount of 9 000 This will cover Caty s store for 3 years 4 On September 1 Alyx signed a contract with Caty to have her dog washed 5 times on the last day of every month Alyx paid Caty the entire contracted amount of 1 000 it is a huge dog upon signing the contract 5 On October 31 Caty received and paid her water bill of 1 500 3 6 On November 15 Caty bought dog biscuits on account for 200 7 Make the adjusting entry associated with the note 8 Make the adjusting entry associated with the machine 9 Make the adjusting entry associated with 4 above 10 Make the adjusting entry associated with 3 11 Reverse any of the entries above that can be reversed 4 Adjusting and Closing Entries A Using the T accounts on the following page show the adjusting entries for the four situations described below Be sure to label each entry according to its number designation below 1 KM Company borrowed 1 000 000 on March 31 from a good friend of one of the owners The interest rate is 12 annually with the first payment to be made next year 2 KM Company started out this year with various supplies worth 150 000 It has 50 000 of those supplies left at the end of the year 3 KM Company has rented its corporate headquarters for the last seven months this year from the uncle of one of the owners The uncle has told them that CT can pay the 60 000 annual rent after they have been in the building for one year 4 KM Company earned 75 000 of its unearned revenue during the year Additional Information You only need to make the year end adjusting entries for the above transactions The original entries have already been made for you Assume KM Company closes its books each December 31 B After making the adjusting entries required in part A use the T accounts to find the ending balance in each account and close all temporary accounts Label each closing entry c1 c2 c3 etc 5 Interest Payable Rent Payable Unearned Rent Rev 200 000 Supplies Supplies Expense Interest Expense 150 000 Revenue Rent Expense Income Summary 200 000 Retained Earnings 6 Adjusting Entries Remember No cash involved Using the information provided below prepare year end adjusting entries as of December 31 2000 for Kaufman Kaufman Prestige 1 A three year insurance policy was purchased on June 1 2000 for 7 200 The policy was recorded as a debit to Prepaid Insurance 2 A company building is rented to JESSIE LLP for 2 000 per month On October 1 2000 JESSIE LLP prepaid its rent in the amount of 8 000 The cash receipt was credited in full to Unearned Rent Revenue by Kaufman Kaufman Prestige 3 Supplies on hand at December 31 1999 were 1 200 During 2000 additional supplies of 2 500 were purchased The purchase was debited to Supplies Inventory when made At December 31 2000 supplies on hand were 1 000 4 On September 1 2000 Kaufman Kaufman Prestige borrowed 30 000 from Nathan s Corner Bank on a 3 year note payable The note pays 12 annual interest with all principal and interest due at the end of 3 years 5 Kaufman Kaufman Prestige pays its employees on the first day of every month On Dec 31 2000 the company owes its employees 12 075 for the month of December to be paid on January 1 2001 6 The company bought a building for 12 000 on July 1 2000 The building has a useful life of 10 years 7 Use the adjusting entries above to prepare any reversing entries that may be needed 7 Statement of Cash Flows Jenny s Company s 2013 income statement and comparative balance sheets at December 31 of 2013 and 2012 are shown below Jenny s Company Comparative Balance Sheets Assets Cash Accounts Receivable net Inventory Prepaid Rent Plant Assets Equip Accumulated Depreciation Total Assets Liabilities Stockholders Equity Accounts Payable Wages Payable Income Tax Payable Bonds Payable Common Stock Retained Earnings Total Liabilities Stockholder s Equity 18 000 15 000 10 000 21 000 191 000 108 000 4 600 9 000 2013 82 000 39 000 2 000 60 000 2 400 1 000 20 000 60 000 103 000 191 000 2012 7 000 28 000 4 000 75 000 1 700 1 300 60 000 36 000 108 000 Sales Supplies Expense Wages Expense Depreciation Expense Rent Expense Other Operating Expenses Income Tax Expense Net Income Jenny s Company Income Statement For the Year Ended December 31 2013 280 000 18 000 41 000 9 000 2 000 68 000 14 000 152 000 128 000 Other Information There was a sale of equipment made during the year This equipment had originally been purchased for 40 000 and was sold for 20 000 cash At the time of the sale the accumulated depreciation on the equipment was 20 000 Hint don t worry about the value in the accumulated depreciation account until after you make the entry for this transaction Also make this entry before accounting for the purchase of new equipent all sales are on account all supplies are on account equipment purchased during the year was for cash all bonds are issued for cash other operating expenses are paid for with cash Use the direct method to recreate the transactions for Jenny s Company in the T accounts on the following page Number all transactions and write a description of the cash flow next to each …