Reference no: EM132324961

Question

Problem

Tyler Company is a construction company that specializes in kitchen and bathroom remodels. Their policy is to require at 25% deposit for any job costing $10,000 or more, with payment due in full within 30 days of completion. Tyler Company's accountants were gathering information to prepare the financial statements for the year 2017. They found the following information:

a. On May 1, 2017, the company purchased a one-year insurance plan for $3,600. Coverage started on the date of purchase. The company debited Prepaid Insurance and credited Cash for the full amount at the time of purchase.

b. On July 1, 2017, Tyler Company purchased a new utility van for $43,000 in cash. The depreciation on the van is $5,000 per year.

c. On September 1, 2017, Tyler Company obtained a nine-month, $30,000, 8% loan. The loan, and any associated interest, is to be repaid on May 31, 2018. As of December 31, 2017, the company has not yet recorded the interest on the loan for the year.

d. On October 20, 2017 Tyler Company completed a small bathroom renovation for a customer for $6,200. The customer has 30 days to pay the bill in full.

e. On November 1, 2017, Tyler Company received a $5,000 deposit from one of its customers for a kitchen remodel job that was due to be completed in in December.

f. On November 16, 2017, Tyler Company received the $6,200 due from the customer in transaction (d).

g. On November 20, 2017 Tyler Company incurred $950 of repairs on several pieces of equipment. Tyler had 30 days from the time of completion to pay this bill.

h. On December 3, 2017 Tyler completed a minor bathroom upgrade for $3,200. The customer paid the bill upon completion of the work.

i. On December 15, 2017 Tyler paid for the repairs of the equipment (from transaction "g") in full.

j. Tyler completed the kitchen renovation job (from transaction "e") on December 28,2017. The final cost of the project was $21,500. (Hint: Remember you received a $5,000 deposit for this job, so you have to make the adjusting entry for that transaction plus account for the remainder of the balance received).

k. The company had $600 of supplies at the beginning of the year. They purchased $1,300 of supplies throughout the year. A year-end count determined that $750 of supplies were still on hand.

l. On December 31st, Tyler Company owed two of contractors $7,500 for services performed.

Required:

a. Record the events above, and any associated adjusting entries, on a Financial Statements Effects Template. (See below for an example. You can use the ones in the Weekly Review Problems- Module 3 file as a template for your assignment.)

b. Prepare journal entries, including any adjusting entries, for the transactions above.

c. What is the difference between Depreciation Expense and Accumulated Depreciation? Be sure to state on which financial statement each one is recorded.

d. What is the difference between an accrual and a deferral? Give an example of an accrual adjustment. Give an example of a deferral adjustment. (FYI - you can refer to the notes in the "Debits and Credits" handout to assist you with this. This is posted in the Module 3 area."