The unadjusted trial balance and adjustment data of Mark's Motors at December 31, 2016, follow:

$$\begin{array}{c} \textbf{FARMER INVESTMENT ADVISERS}\\ \text{Unadjusted Trial Balance}\\ \text{December 31, 2016}\\ \end{array}$$

$$\begin{array}{lrr} &\textbf{Balance}\\ \textbf{Account Title}&\textbf{Debit}&\textbf{Credit}\\ \text{Cash}&\$4,800\\ \text{Accounts Receivable}&26,600\\ \text{Office Supplies}&600\\ \text{Prepaid Insurance}&2,400\\ \text{Equipment}&53,900\\ \text{Accumulated Depreciation - Equipment}&&\$41,500\\ \text{Accounts Payable}&&13,500\\ \text{Wages Payable}&&\\ \text{Unearned Revenue}&&5,500\\ \text{Common Stock}&&18,900\\ \text{Dividends}&4,200\\ \text{Service Revenue}&&16,300\\ \text{Depreciation Expense - Equipment}\\ \text{Wages Expense}&1,500\\ \text{Insurance Expense}&\\ \text{Utilities Expense}&1,700\\ \text{Supplies Expense}&\\ \text{Total}&\underline{\underline{\$95,700}}&\underline{\underline{\$95,700}}\\ \end{array}$$

Adjustment data at December 31, 2016: a. Depreciation on equipment, $1,600. b. Accrued Wages Expense,$1,000. c. Office Supplies on hand, $100. d. Prepaid Insurance expired during December,$200. e. Unearned Revenue earned during December, $4,400. f. Accrued Service Revenue,$800.

2017 transactions: a. On January 4, Mark's Motors paid wages of $1,200. Of this,$1,000 related to the accrued wages recorded on December 31. b. On January 10, Mark's Motors received $1,500 for Service Revenue. Of this,$800 related to the accrued Service Revenue recorded on December 31.

Requirements

1. Journalize adjusting entries.
2. Journalize reversing entries for the appropriate adjusting entries.
3. Refer to the 2017 data. Journalize the cash payment and the cash receipt that occurred in 2017.

From the following Company T adjusted trial balance, prepare the following:

D. Closing journal entries

$$\begin{array}{c} \textbf{Adjusted Trial Balance} \end{array}$$

$$\begin{array}{lcc} &\textbf{Debit}&\textbf{Credit}\\[5pt] \text{Cash}&\text{\$\hspace{5pt}24,000}\\ \text{Accounts Receivable}&\text{\hspace{10pt}14,900}\\ \text{Prepaid Insurance}&\text{\hspace{15pt}5,300}\\ \text{Land}&\text{\hspace{10pt}13,500}\\ \text{Accounts Payable}&&\text{\$\hspace{5pt}12,400}\\ \text{Salaries Payable}&&\text{\hspace{15pt}1,500}\\ \text{Common Stock}&&\text{\hspace{10pt}34,000}\\ \text{Retained Earnings}&&\text{\hspace{10pt}10,200}\\ \text{Dividends}&\text{\hspace{15pt}5,000}\\ \text{Service Revenue}&&\text{\hspace{10pt}56,300}\\ \text{Insurance Expense}&\text{\hspace{15pt}7,900}\\ \text{Salaries Expense}&\text{\hspace{10pt}39,000}\\ \text{Miscellaneous Expense}&\underline{\text{\hspace{15pt}4,800}}&\underline{\text{\hspace{39pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}114,400}}}&\underline{\underline{\text{\$\hspace{1pt}114,400}}}\\ \end{array}$$

An insurance company estimates that it should make an annual profit of $150 on each homeowner’s policy written, with a standard deviation of$6000. a) Why is the standard deviation so large? b) If it writes only two of these policies, what are the mean and standard deviation of the annual profit? c) If it writes 10,000 of these policies, what are the mean and standard deviation of the annual profit? d) Is the company likely to be profitable? Explain. e) What assumptions underlie your analysis? Can you think of circumstances under which those assumptions might be violated? Explain.

$$\begin{matrix} \text{Estimated uncollectible accounts based} & \text{}\\ \text{on aging accounts receivable} & \text{\$ 3,697.32}\\ \text{Accrued interest income} & \text{137.50}\\ \text{Merchandise inventory} & \text{45,058.15}\\ \text{Supplies inventory} & \text{126.00}\\ \text{Jalue of prepaid insurance} & \text{1,535.80}\\ \text{Annual depreciation expense- equipment} & \text{2,250.00}\\ \text{Accrued interest expense} & \text{277.58}\\ \text{Prepaid rent income earned} & \text{1,000.00}\\ \end{matrix}$$

Complete the adjusted trial balance.

The following unadjusted trial balance is for Power Demolition Company as of the end of its April 30, 2017, fiscal year. The April 30, 2016, credit balance of the owner's capital account was $46,900, and the owner invested$40,000 cash in the company during the 2017 fiscal year.

$$\begin{array}{c} \textbf{POWER DEMOLITION COMPANY}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{June 30, 2017} \end{array}$$

Required

1. Prepare and complete a 10-column work sheet for fiscal year 2017, starting with the unadjusted trial balance and including adjustments based on these additional facts.
 a. The supplies available at the end of fiscal year 2017 had a cost of $7,900.
 b. The cost of expired insurance for the fiscal year is$10,600.
 c. Annual depreciation on equipment is $7,000.
 d. The April utilities expense of$650 is not included in the unadjusted trial balance because the bill arrived after the trial balance was prepared. The $800 amount owed needs to be recorded.
 e. The company's employees have earned$2,000 of accrued wages at fiscal year-end.
 f. The rent expense incurred and not yet paid or recorded at fiscal year-end is $3,000.
 g. Additional property taxes of$550 have been assessed for this fiscal year but have not been paid or recorded in the accounts.
 h. The long-term note payable bears interest at 12% per year. The unadjusted Interest Expense account equals the amount paid for the first 11 months of the 2017 fiscal year. The $300 accrued interest for April has not yet been paid or recorded. (The company is required to make a$10,000 payment toward the note payable during the 2018 fiscal year.)
2. Using information from the completed 10-column work sheet in part 1, journalize the adjusting entries and the closing entries.
3. Prepare the income statement and the statement of owner's equity for the year ended April 30 and the classified balance sheet at April 30, 2017.

Analysis Component
4. Analyze the following separate errors and describe how each would affect the 10-column work sheet. Explain whether the error is likely to be discovered in completing the work sheet and, if not, the effect of the error on the financial statements.
 a. Assume the adjusting entry to reflect expiration of insurance coverage for the period was recorded with a $2,000 credit to Prepaid Insurance and a$2,000 debit to Insurance Expense. The adjustment should have been for $10,600.
 b. When the adjusted trial balance in the work sheet was completed, assume that the$4,700 Repairs Expense account balance is extended to the Debit column of the Balance Sheet columns.

An insurance company checks police records on 582 accidents selected at random and notes that teenagers were at the wheel in 91 of them. a) Create a 95% confidence interval for the percentage of all auto accidents that involve teenage drivers. b) Explain what your interval means. c) Explain what “95% confidence” means. d) A politician urging tighter restrictions on drivers’ licenses issued to teens says, “In one of every five auto accidents, a teenager is behind the wheel.” Does your confidence interval support or contradict this statement? Explain.

Amy Austin established an insurance agency on March 1 of the current year and completed the following transactions during March:

a. Opened a business bank account with a deposit of $\$ 50,000$ from personal funds.
b. Purchased supplies on account, $\$ 4,000$.
c. Paid creditors on account, $\$ 2,300$.
d. Received cash from fees earned on insurance commissions, $\$ 13,800$.
e. Paid rent on office and equipment for the month, $\$ 5,000$.
f. Paid automobile expenses for the month, $\$ 1,150$, and miscellaneous expenses, $\$ 300$.
g. Paid office salaries, $\$ 2,500$.
h. Determined that the cost of supplies on hand was $\$ 2,700$; therefore, the cost of supplies used was $\$ 1,300$.
i. Billed insurance companies for sales commissions earned, $\$ 12,500$.
j. Withdrew cash for personal use, $\$ 3,900$.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

$$\begin{array}{c} \begin{array}{ccc} \begin{array}{ccccc} && \text{Assets}\\ \hline && \text{Accounts}\\ \text{Cash} & + & \text{Receivable} & + & \text{Supplies} \end{array} & \begin{array}{c} =\\ \\ = \end{array} & \begin{array}{ccccccccccccccccc} \text{Liabilities} & + &&&&&&& \text{Owner’s Equity}\\ \hline \text {Accounts} && \text {Amy Austin,} && \text {Amy Austin,} && \text {Fees} && \text {Rent } && \text { Salaries} && \text {Supplies } && \text { Auto } && \text { Misc. } \\ \text { Payable } & + & \text { Capital } & - & \text { Drawing } & + & \text { Earned} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense } \\ \end{array} \end{array} \end{array}$$

2. Briefly explain why the owner's investment and revenues increased owner's equity, while withdrawals and expenses decreased owner's equity.
3. Determine the net income for March.
4. How much did March's transactions increase or decrease Amy Austin's capital?

Use the table for the percent of coverage to determine the (a) amount of insurance on the home, (b) amount of coverage for the garage, (c) amount of coverage for loss of use, and (d) amount of coverage for personal property.

$$\begin{array}{|l|c|} \hline{\text { Coverage }} & \begin{array}{c} \text { Percent } \\ \text { Covered } \end{array} \\ \hline \text { Garage and other structures } & 10 \% \\ \hline \text { Loss of use } & 20 \% \\ \hline \text { Personal property } & 50 \% \\ \hline \end{array}$$

Replacement value: $324,000; coverage: 90%.

Claxon Company owns a machine with a cost of $305,000 and accumulated depreciation of$65,000 that can be sold for $262,000$, less a 5% sales commission. Alternatively, the machine can be leased by Claxon Company for three years for a total of $272,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Claxon Company on the machine would total$21,600 over the three years. Prepare a differential analysis on January 12 as to whether Claxon Company should lease (Alternative 1) or sell (Alternative 2) the machine.

$$\begin{matrix} \text{Estimated uncollectible accounts based} & \text{}\\ \text{on aging accounts receivable} & \text{\$ 3,697.32}\\ \text{Accrued interest income} & \text{137.50}\\ \text{Merchandise inventory} & \text{45,058.15}\\ \text{Supplies inventory} & \text{126.00}\\ \text{Jalue of prepaid insurance} & \text{1,535.80}\\ \text{Annual depreciation expense- equipment} & \text{2,250.00}\\ \text{Accrued interest expense} & \text{277.58}\\ \text{Prepaid rent income earned} & \text{1,000.00}\\ \end{matrix}$$

Post the adjusting entries to the T accounts.

An insurance company claims that in the entire population of homeowners the mean annual loss from fire is $\mu=\$ 250$ and the standard deviation of the loss is $\sigma=\$ 5000.$ The distribution of losses is strongly right-skewed: many policies have $0 loss, but a few have large losses. The company hopes to sell 1000 of these policies for$300 each. If the company wants to be 90% certain that the mean loss from fire in an SRS of 1000 homeowners is less than the amount it charges for the policy, how much should the company charge?

Included in the December 31 trial balance of Rivera Company are the following assets.

$$\begin{array}{lrrllrrr} \text{Cash}&&\$190,000&\hspace{10pt}&\text{Work in process}&&\$200,000\\ \text{Equipment}&&1,100,000&\hspace{10pt}&\text{Accounts receivable (net)}&&400,000\\ \text{Prepaid Insurance}&&41,000&\hspace{10pt}&\text{Patents}&&110,000\\ \text{Raw Materials}&&335,000&\hspace{10pt}&\text{Finished goods}&&170,000\\ \end{array}$$

Prepare the current assets section of the December 31 balance sheet.

An auto insurance company has 10,000 policyholders. Each policyholder is classified as: (i) young or old; (ii) male or female; and (iii) married or single. Of these policyholders, 3000 are young, 4600 are male, and 7000 are married. The policyholders can also be classified as 1320 young males, 3010 married males, and 1400 young married persons. Finally, 600 of the policyholders are young married males. How many of the company's policyholders are young, female, and single? Choose one of the following. (a) 280 (b) 423 (c) 486 (d) 880 (e) 896

Assuming the following Adjusted Trial Balance, recreate the Post-Closing Trial Balance that would result after all closing journal entries were made and posted:

$$\begin{array}{c} \textbf{Adjusted Trial Balance} \end{array}$$

$$\begin{array}{lcc} &\textbf{Debit}&\textbf{Credit}\\[5pt] \text{Cash}&\text{\$\hspace{1pt}17,900}\\ \text{Accounts Receivable}&\text{\hspace{10pt}9,900}\\ \text{Supplies}&\text{\hspace{10pt}1,600}\\ \text{Prepaid Insurance}&\text{\hspace{10pt}2,500}\\ \text{Salaries Payable}&&\text{\$\hspace{5pt}8,600}\\ \text{Common Stock}&&\text{\hspace{5pt}10,000}\\ \text{Retained Earnings}&&\text{\hspace{10pt}2,800}\\ \text{Dividends}&\text{\hspace{10pt}4,000}\\ \text{Service Fee Revenue}&&\text{\hspace{5pt}37,050}\\ \text{Salaries Expense}&\text{\hspace{5pt}16,900}\\ \text{Supplies Expense}&\text{\hspace{10pt}4,200}\\ \text{Insurance Expense}&\underline{\text{\hspace{10pt}1,450}}&\underline{\text{\hspace{34pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}58,450}}}&\underline{\underline{\text{\$\hspace{1pt}58,450}}}\\ \end{array}$$