Question

PREPARE ADJUSTING ENTRIES...

A.) On March 1, 2018, Accounting Creations rented a portion of one store to Marketing Majors Inc. The contract was for 15 months and Accounting Creations required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

B.) Accounting Creations started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $3,549. These costs were expensed and recorded as a miscellaneous selling expense. Accounting Creations has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $15,000.  

C.) Accounting Creations uses the FIFO Inventory Method in valuing inventory. The inventory balance of $425,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $12,500 of marketing games that belonged to Marketing Majors Inc. was included in the account. You also note that $7,000 of goods shipped to Accounting Creations f.o.b. destination were in transit on December 31, 2018 and included in the physical count.

Answer 1