Bill s Catering Company is at its accounting year end

December #909
Bill’s Catering Company is at its accounting year- end, December 31, 2015. The following data
that must be considered were developed from the company’s records and related documents:
a. During 2015, office supplies amounting to $ 1,200 were purchased for cash and debited in full
to supplies inventory. At the beginning of 2015, the supplies on hand amounted to $ 450. The
inventory of supplies at December 31, 2015 was $ 400. b. On December 31, 2015, the company
catered an evening gala for a local celebrity. The $ 7,500 bill was payable by the end of January
2016. No cash has been collected, and no journal entry has been made for this transaction.
(Ignore cost of sales.) c. On October 1, 2015, a one- year insurance premium on equipment in
the amount of $ 1,200 was paid and debited in full to prepaid insurance on that date. Coverage
began on November 1. d. On December 31, 2015, repairs on one of the company’s delivery
vans were completed at a cost estimate of $ 600; the amount has not yet been paid or
recorded. The repair shop will bill Bill’s Catering at the beginning of January 2016.e. In
November 2015, Bill’s Catering signed a lease for a new retail location, providing a down
payment of $ 2,100 in rent for the first three months. The amount was debited to prepaid rent.
The lease began on December 1, 2015. f. On July 1, 2015, the company purchased new
refrigerated display counters at a cash cost of $ 18,000. Depreciation of $ 2,600 has not been
recorded for 2015. g. On November 1, 2015, the company lent $ 4,000 to one of its employees
on a one- year, 3 percent note. The principal plus interest is payable by the employee on
October 31, 2016. h. Earnings before any of the adjustments or income taxes totalled $ 22,400.
The company’s income tax rate is 30 percent. Compute the adjusted net earnings, taking into
consideration transactions (a) through (g) to determine the income tax expense for 2015.
Required:1. Indicate whether each transaction relates to a deferred revenue, a deferred
expense, an accrued revenue, or an accrued expense. 2. Prepare the adjusting entries required
at December 31, 2015, for transactions (a) through (g). 3. Using the following headings, indicate
the effect of each adjusting entry and the amount of each. Use + for increase, – for decrease,
and “ N” for no effect:
View Solution:
Bill s Catering Company is at its accounting year end December

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