Question

1) Complete problems 4-1 (9 pts) and 4-6 (8 pts) from the text, 2) Complete the following end of year accrual adjustments for the following situations. Put each end of year adjustment (A, B, C, and D) on its own separate page. It is 12/31/2019 and Oakland Farms needs to do their end of year adjustments for 2019. The adjustments they need to complete are: A) Oakland Farms had cash sales of $388,000 market livestock during 2019. During 2019, they purchased $139,000 worth of feeder steers. At the end of the year (12/31/2019) they had $63,000 of purchased feeder steers on hand. At the beginning of the year (1/1/2019) they had $91,000 of purchased feeders steers in inventory. They have no raised animals on their farm. (20 pts) B) Oakland Farms harvested 800 acres of feed corn during 2019. They sold $250,000 worth of the feed corn, but they intend to use the rest as feed for their dairy cows. At the end of the year (12/31/2019), the farm had $ 194,000 of raised feed corn on hand. At the beginning of the year (1/1/2019) they had $162,000 of raised feed corn on hand. (20 pts) C) Oakland Farms purchased a one-year insurance policy for $48,000 on August 1, 2019. At the beginning of the year (1/1/2019) they had $20,000 in Prepaid Expenses for insurance. (20 pts) D) Oakland Farms had cash sales of $413,000 market livestock during 2019. At the end of the year (12/31/2019), they determine that one of their cattle buyers still owes them $55,000 (i.e., Accounts Receivable). At the beginning of the year (1/1/2019) their Accounts Receivable balance was $62,000. (20 pts) For each end-of-year accrual adjustment, 1) calculate the necessary adjustment, 2) complete the related journal entry, 3) complete the income statement adjustment, and 4) show the proper balance sheet entry for the relevant account.

Answer 1

Amounts are in $ A) Livestock Income Statement Extract Sales (Livestock) 388000 Less: Cost of Goods Sold: -167000 Opening Stock (Livestock) 91000 Add: Purchases 139000 Less: Closing Stock -63000 Gross Profit 221000 Journal Entry Debit Credit Cost of Goods Sold 167000 Livestock Inventory 167000 Adjustment Opening Stock (Livestock) Add: Purchases Less: Closing Stock Cost of Goods Sold Balance Sheet Assets Inventory Livestock Current Year Previous Year 63000 91000 139000 -63000 167000 B) Feed Corn Income Statement Extract Cost of Goods Sold (Feed Corn) 250000 Journal Entry Debit Credit Cost of Goods Sold 250000 Feed Corn Inventory 25000 Adjustment (Harvested Feedcorn) Opening Stock 162000 Harvested Feedcorn 282000 Bal Fig Less: Closing Stock -194000 Cost of Goods Sold 250000 Balance Sheet Assets Current Year Previous Year Feed Corn Inventory Selling Price of Feed Corn can be more or less than above value which will five us Gross Profit/Loss

Journal Entry Income Statement Extract Insurance Expenses 40000 Balance Sheet Assets Prepaid Insurance Current Year Previous Year 28000 20000 Insurance Prepaid Insurance Adjustment (Insurance) Debit Credit Insurance 20000 Prepaid Insurance (previous) 20000 Add: Insurance (Current) Total Insurance 48000 (12 months) 48000 20000 20000 40000 Insurance Bank 28000 Prepaid Insurance Insurance (7months) 28000 D) Income Statement Extract Sales Livestock: Cash Credit Total Journal Entry Adjustment (Insurance) Buyer owes money due to credit sales NA whether it be opening balance or closing balance They are to be kept separate from Cash Sales 413000 XXX XXX Balance Sheet Assets Current Year Previous Year Accounts Receivable 62000 55000