The Director of Accounting has some issues in regards to the month-end shut cutoff procedures which can be at present in place at County Common Hospital and is seeking to you for some suggestions. Their fundamental concern is that not all revenues and bills are recorded within the correct months. That is of explicit concern as a result of the fiscal 12 months finish (December 31st) is arising, and the Director of Accounting doesn’t need any audit changes.
The director has formally reached out to you by way of electronic mail with an inventory of transactions that they’re involved about:
Begin the memo with a paragraph that addresses VP degree administration. This must be opening sentences that designate why the transactions are being reviewed. Merely explaining the necessity for changes on the finish of an accounting interval may be included on this paragraph. Clarify the distinction between an accrual and deferral and why it makes a distinction in adjusting as properly
· The corporate delivered companies in September $10,000 cost that was made in November. (accounts receivable/income; money/accounts receivable)
· The corporate is 80% completed on a $50,000 contract for companies however haven’t billed the consumer but.
· On December 1st the corporate bought a one-year insurance coverage coverage on behalf of their executives for $12,000 and debited pay as you go insurance coverage. (Asset, pre-paid expense not but used)
· The businesses final pay interval ends on December 24th. The biweekly payroll is constant at $500,000 per pay interval. (Accrued expense/Money)
· Curiosity cost on the corporate bonds ($1,000,000 face worth, 6%) is made semiannually on January 15th and July 15th.
· The corporate’s electrical meter is learn on the 15th of every month, and the invoice is just not acquired till the primary of the next month. The electrical invoice is persistently operating $5,000 per thirty days. (expense/accounts payable) deferral
· The corporate makes use of a storage facility on the opposite facet of city. The owner, as a part of an inducement to the corporate, has agreed to delay the December money cost to be used till January 15th of subsequent 12 months. The corporate signed a month-to-month rental settlement of $2,000 per thirty days on December 1st. (Accounts Payable/Rental Expense) deferral
The path has additionally requested the next questions:
· Will these transactions require an adjusting entry? Why?
· Is it an accrual or deferral and provides your justification?
· What are the accounts that shall be debited and credited for this entry?
The director closes the e-mail by asking that you simply create a memo along with your findings that they will take to the Vice President of Accounting.
***Mastery task should embrace the next:
1. An in depth memo with correct formatting; tone of the memo is particular for VP degree administration.
2. All right solutions for whether or not every of the transactions requires an adjusting entry or not and why the reply was chosen.
three. All solutions had been right for every of the transactions relating to whether or not it’s an accrual or deferral; included justification for every transaction.
four. Identifies all the accounts that might be debited and credited for every of the entries.
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