1, The Rocket Company began business in 2015 and uses the accrual method. The following transactions occurred in 2015; some are summary transactions for 2015, others occurred on the date given.
a, Issued common stock for $60,000 cash.
b, On September 1, 2015, borrowed $50,000 from First Bank by issuing a 5-year, 12% note. Interest on the note is paid annually on August 31.
c, On November 1, 2015, paid $54,000 for a 1-year rental contract, beginning on that date, for the store building and fixtures.
d, Inventory purchased on account in 2015 was $20,000.
e, Sales to customers on account in 2015 were $40,000. The cost of goods sold was $16,000.
f, Paid $12,000 on account for merchandise purchased in 4.
g, Received $25,000 on account from customers.
h, Paid employees $10,000 for salaries.
Requirement 1: Record the 2015 transactions in the t-accounts.
Requirement 2: Record the necessary December 31, 2015, adjusting entries in the t-accounts, using the information from transactions a-h above.
Requirement 3: Determine the 2015 net income
Requirement 4: Prepare the December 31, 2015, balance sheet for Rocket Company. Do NOT classify the balance sheet amounts. Show any necessary computations.
Requirement 5: On August 31, 2016, Rocket paid the first annual interest payment to First Bank. In the table below, show the effect (+ or – and the DOLLAR AMOUNT ) of the August 31 transaction on Rocket’s 2016 financial statements.
2, Snoopy Company provides security services to customers. Snoopy (the dog), serves as the company’s accountant. On December 31, 2015, Snoopy intended to record the necessary annual adjusting entries but was called to supper before he could do so. Before leaving work, Snoopy identified the following items to consider for possible adjustment.
In the space below each item, record the necessary adjusting entry. Show all computations to support your answer. If an adjusting entry is not necessary, explain why.
a, On September 1, 2015, Snoopy Company received $24,000 from Woodstock Inc. for a 1-year contract to provide security services beginning on that date. Service revenue was credited on September 1.
b, At the end of 2015, Snoopy Company owed $25,000 to employees for salaries.