CC\'s Race Cars is reviewing its books at the end of the fiscal year, 12/31/12.

Question

CC's Race Cars is reviewing its books at the end of the fiscal year, 12/31/12. It makes adjusting entries at the end of the fiscal year, and you need to identify if an adjusting entry is needed. Then pick two that need adjusting and prepare those adjusting entries. 1. On July 1, 2012, company paid a two-year premium of $18,000 on an insurance policy that is effective July 1, 2012, and expires June 30,2014. Does it need an adjustment? 2. Company received $48,000 on May 1, 2012, in return for which the company agreed to provide consulting services for 12 months beginning immediately. Does it need an adjustment? 3. Employees work Monday through Friday, and salaries of $4,000 per week are paid each Friday. This year December 31 is a Thursday, Does it need an adjusting expense? 4. On June 15, the company purchsed $1,300 of supplies for cash On Sept. 14, the company made another cash purchase of $2,100. As of Dec. 31, the company accountant determined that $1,600 of supplies were on hand at year-end. Does it need an adjustment? 5. The company received a note from a customer on Feb. 1, 2012, as a payment for services. The amount of the note is $20,000 with interest at 8%. The note and interest will be paid on Feb 1, 2013. Does this need an adjustment?

Explanation / Answer

1. On July 1, 2012, company paid a two-year premium of $18,000 on an insurance policy that is effective July 1, 2012, and expires June 30,2014. Does it need an adjustment?

yes

2. Company received $48,000 on May 1, 2012, in return for which the company agreed to provide consulting services for 12 months beginning immediately. Does it need an adjustment?

no

3. Employees work Monday through Friday, and salaries of $4,000 per week are paid each Friday. This year December 31 is a Thursday, Does it need an adjusting expense?

no

4. On June 15, the company purchsed $1,300 of supplies for cash On Sept. 14, the company made another cash purchase of $2,100. As of Dec. 31, the company accountant determined that $1,600 of supplies were on hand at year-end. Does it need an adjustment

yes

5. The company received a note from a customer on Feb. 1, 2012, as a payment for services. The amount of the note is $20,000 with interest at 8%. The note and interest will be paid on Feb 1, 2013. Does this need an adjustment?

no

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