The records of Hetrick Company and Frear Corporation show the following information.
Prepare journal entries, if required, to adjust the books of Hetrick Company or Frear Corporation, as noted. The fiscal year for both companies ends December 31.
(A)
On December 1, 2017, Hetrick Company received a rent payment for office space leased to Frear Corporation. Because Frear has a very poor credit rating, Hetrick required an advance payment of rent
for eighteen months. The payment of $225,000 cash was for the following eighteen months and was credited to deferred rent revenue when it was received. Record the original entry Hetrick made when payment was received on December 1, 2017.
Date
Account Names
Debits
Credits
01-Dec-17
Calculations:
(B)
Refer to (A) above. Record the entry Hetrick should have made, if any, to adjust the books before the
close of the year ended December 31, 2017, to record rent revenue earned in December.
Date
Account Names
Debits
Credits
31-Dec-17
Calculations:
(C)
Refer to (A) above. If, on December 1, 2017, when Hetrick Company received the rent payment
of $225,000 for office space leased to Frear Corporation, the accountant for Hetrick credited
rent revenue instead of deferred rent revenue, what entry should Hetrick have made, if any,
before the close of the year ended December 31, 2017 to record rent revenue earned in December?
Note: You may want to consider preparing multiple entries to complete this adjustment.
Date
Account Names
Debits
Credits
31-Dec-17
Calculations:
(D)
Refer to (A) above. On December 1, 2017, when Frear Corporation made the payment to Hetrick
Company in advance for eighteen months of rent, totaling $225,000, Frear’s accountant debited
Prepaid Rent Expense for the entire amount. Record the original entry made by Frear.
Date
Account Names
Debits
Credits
01-Dec-17
Calculations:
(E)
Refer to (D) above. Record the entry Frear should have made, if any, to adjust the books before the
close of the year ended December 31, 2017, to record rent expense incurred in December.
Date
Account Names
Debits
Credits
31-Dec-17
Calculations:
(F)
Refer to (D) above. If, on December 1, 2017, when Frear Corporation made the advance rent payment
of $225,000, the accountant for Frear debited rent expense instead of prepaid rent expense, what entry should Frear have made, if any, before the close of the year ended December 31, 2017 to record expense
incurred in December? Note: You may want to prepare multiple entries for this adjustment.
Date
Account Names
Debits
Credits
31-Dec-17
Calculations:
(G) Short essay question: What observations do you have about the preceding problems (A) through (F), ...
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
The records of Hetrick Company and Frear Corporation show the fo
1. The records of Hetrick Company and Frear Corporation show
the following information.
Prepare journal entries, if required, to adjust the books of
Hetrick Company or Frear Corporation, as noted. The fiscal
year for both companies ends December 31.
(A)
On December 1, 2017, Hetrick Company received a rent
payment for office space leased to Frear Corporation. Because
Frear has a very poor credit rating, Hetrick required an
advance payment of rent
for eighteen months. The payment of $225,000 cash was for
the following eighteen months and was credited to deferred rent
revenue when it was received. Record the original entry
Hetrick made when payment was received on December 1,
2017.
Date
Account Names
Debits
2. Credits
01-Dec-17
Calculations:
(B)
Refer to (A) above. Record the entry Hetrick should have made,
if any, to adjust the books before the
close of the year ended December 31, 2017, to record rent
revenue earned in December.
4. (C)
Refer to (A) above. If, on December 1, 2017, when Hetrick
Company received the rent payment
of $225,000 for office space leased to Frear Corporation, the
accountant for Hetrick credited
rent revenue instead of deferred rent revenue, what entry
should Hetrick have made, if any,
before the close of the year ended December 31, 2017 to
record rent revenue earned in December?
Note: You may want to consider preparing multiple entries to
complete this adjustment.
Date
Account Names
Debits
Credits
6. Refer to (A) above. On December 1, 2017, when Frear
Corporation made the payment to Hetrick
Company in advance for eighteen months of rent, totaling
$225,000, Frear’s accountant debited
Prepaid Rent Expense for the entire amount. Record the
original entry made by Frear.
Date
Account Names
Debits
Credits
01-Dec-17
7. Calculations:
(E)
Refer to (D) above. Record the entry Frear should have made, if
any, to adjust the books before the
close of the year ended December 31, 2017, to record rent
expense incurred in December.
Date
Account Names
Debits
Credits
8. 31-Dec-17
Calculations:
(F)
Refer to (D) above. If, on December 1, 2017, when Frear
Corporation made the advance rent payment
of $225,000, the accountant for Frear debited rent expense
instead of prepaid rent expense, what entry should Frear have
made, if any, before the close of the year ended December 31,
2017 to record expense
incurred in December? Note: You may want to prepare
9. multiple entries for this adjustment.
Date
Account Names
Debits
Credits
31-Dec-17
10. Calculations:
(G) Short essay question: What observations do you have about
the preceding problems (A) through (F),
comparing and contrasting the accounting for the rent payment
by the two companies?
(H)
On September 1, 2017, Frear Corporation borrowed
$1,200,000 from Hetrick Company, signing an unsecured
promissory note. The loan is for 3 years, at 7 percent annual
11. interest. The principal and interest are payable at the maturity
date. The following entry was made by Frear’s accountant
when Frear received the loan amount and signed the
promissory note.
dr. Cash $1,200,000
cr. Note Payable $1,200,000
Frear makes monthly entries for the accrual of interest
incurred for the loan.
What is the monthly entry Frear should have made for the
month of November 2017, if any, for interest expense
incurred for the loan.
Date
Account Names
Debits
Credits
30-Nov-17
12. Calculations:
(I)
Refer to (H) above. The following entry was made by Hetrick’s
accountant when Hetrick made the loan to Frear:
dr. Note Receivable $1,200,000
cr. Cash $1,200,000
Hetrick makes monthly entries for the accrual of interest
earned for the loan.
What is the monthly entry Hetrick should have made for the
month of December 2017, if any, for interest expense earned
for the loan.
14. comparing and contrasting the accounting for the loan and
related interest by the two companies?
(K)
On September 1, 2018, Hetrick Company purchased and
installed robotic equipment for their manufacturing process.
Hetrick paid $2,000,000 for the equipment, making a down
payment of $500,000 and financing the remainder of the
purchase price with a loan from Citizens Bank, signing a
promissory note. Record the entry Hetrick should have made
for the acquisition of the equipment.
Date
16. (L)
Refer to (K) above. Hetrick estimated that the useful life of
the robotic equipment is 5 years, or 60 months, and it will
have a salvage value of $200,000 after the end of its useful
life.
Hetrick makes monthly entries for depreciation expense for
the robotic equipment.
What is the monthly entry Hetrick should make for the
month of December 2018, if any, for depreciation expense.
Date
Account Names
Debits
Credits
31-Dec-18
17. Calculations:
(M)
On June 1, 2018, Frear Company secured an insurance policy,
for eighteen months of coverage,
beginning August 1, 2018. The total premium of $54,000
was paid on that date. Prepaid
Insurance Expense was debited at the time of the payment.
Frear records the insurance expense incurred for this policy on
a monthly basis.
What entry
should Frear have made for the month of September 2018?
19. Calculations:
(N)
Refer to (K) above. The loan that Hetrick required to purchase
the robotic equipment is for fifteen months, and the principal
and interest is due on the maturity date.
What is the maturity date of the loan? Enter your answer here:
The interest rate for the loan is 8%, per annum.
If Hetrick accrues interest expense monthly for the interest
associated with the loan, what entry should Hetrick make in
December, 2018 for accrued interest, if any?
Date
Account Names
21. Calculations:
For each of the noted items from above, indicate by writing in
the box the type of adjusting entry required, from these options
(the first one is given as an example):
Accrued Expense, Accrued Revenue, Deferred Expense,
Deferred Revenue, Account for Estimate
B
Deferred Revenue
C
E
F