1. Recognition of concepts. Jim Armstrong operates a small company that books enter?tainers for theaters, parties, conventions, and so forth. The companys fiscal year ends on June 30. Consider the following items and classify each as either (1) pre?paid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.a Interest owed on the companys bank loan, to be paid in early July b Professional fees earned but not billed as of June 30 c Office supplies on hand at year-end d An advance payment from a client for a performance next month at a convention e The payment in part (d) from the clients point of view f Amounts paid on June 30 for a 1-year insurance policy g The bank loan payable in part (a) h Repairs to the firms copy machine, incurred and paid in June 2. Understanding the closing process. Examine the following list of accounts:Note PayableAccumulated Depreciation: BuildingAlex Kenzy, DrawingAccounts PayableProduct RevenueCashAccounts ReceivableSupplies ExpenseUtility ExpenseWhich of the preceding accounts a. appear on a post-closing trial balance? b. are commonly known as temporary, or nominal, accounts? c. generate a debit to Income Summary in the closing process? d. are closed to the capital account in the closing process?3. Adjusting entries and financial statements. The following information pertains to Sally Corporation:£ The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one half of this amount had been earned.£ Sally Corporation provided $1,500 of services to Artech Corporation; no billing had been made by December 31.£ Salaries owed to employees at year-end amounted to $1,000.£ The Supplies account revealed a balance of $8,800, yet only $3,300 of supplies were actually on hand at the end of the period.£ The company paid $18,000 on October 1 of the current year to Vantage Property Management. The payment was for 6 months rent of Sally Corporations headquarters, beginning on November 1.Sally Corporations accounting year ends on December 31.Instructions Analyze the five preceding cases individually and determine the following:a. The type of adjusting entry needed at year-end (Use the following codes: A, adjust?ment of a prepaid expense; B, adjustment of an unearned revenue; C, adjustment to record an accrued expense; or D, adjustment to record an accrued revenue.)b. The year-end journal entry to adjust the accountsc. The income statement impact of each adjustment (e.g., increases total revenues by $500)4. Adjusting entries. You have been retained to examine the records of Marys Day Care Center as of December 31, 20X3, the close of the current reporting period. In the course of your examination, you discover the following:£ On January 1, 20X3, the Supplies account had a balance of $1,350. During the year, $5,520 worth of supplies was purchased, and a balance of $1,620 remained unused on December 31.£ Unrecorded interest owed to the center totaled $275 as of December 31.£ All clients pay tuition in advance, and their payments are credited to the Unearned Tuition Revenue account. The account was credited for $65,500 on August 31. With the exception of $15,500 all amounts were for the current semester ending on December 31.£ Depreciation on the schools van was $3,000 for the year.£ On August 1, the center began to pay rent in 6-month installments of $24,000. Mary wrote a check to the owner of the building and recorded the check in Pre?paid Rent, a new account.£ Two salaried employees earn $400 each for a 5-day week. The employees are paid every Friday, and December 31 falls on a Thursday.£ Marys Day Care paid insurance premiums as follows, each time debiting Pre?paid Insurance:Date Paid Policy No. Length of Policy Amount Feb. 1, 20X2 1033MCM19 1 year $540 Jan. 1, 20X3 7952789HP 1 year 912 Aug. 1, 20X3 XQ943675ST 2 years 840 Instructions The centers accounts were last adjusted on December 31, 20X2. Prepare the adjusting entries necessary under the accrual basis of accounting.5. Bank reconciliation and entries. The following information was taken from the accounting records of Palmetto Company for the month of January:Balance per bank$6,150Balance per company records3,580Bank service charge for January20Deposits in transit940Interest on note collected by bank100Note collected by bank1,000NSF check returned by the bank with the bank statement650Outstanding checks3,080Instructions:a. Prepare Palmettos January bank reconciliation. b. Prepare any necessary journal entries for Palmetto.6. Direct write-off method. Harrisburg Company, which began business in early 20X7, reported $40,000 of accounts receivable on the December 31, 20X7, balance sheet. Included in this amount was $550 for a sale made to Tom Mattingly in July. On January 4, 20X8, the company learned that Mattingly had filed for personal bankruptcy. Harrisburg uses the direct write-off method to account for uncollectibles.a. Prepare the journal entry needed to write off Mattinglys account. b. Comment on the ability of the direct write-off method to value receivables on the year-end balance sheet. 7. Allowance method: analysis of receivables. At a January 20X2 meeting, the presi?dent of Sonic Sound directed the sales staff to move some product this year. The president noted that the credit evaluation department was being disbanded be?cause it had restricted the companys growth. Credit decisions would now be made by the sales staff.By the end of the year, Sonic had generated significant gains in sales, and the president was very pleased. The following data were provided by the accounting department:20X2 20X1 Sales$23,987,000$8,423,000Accounts Receivable, 12/3112,444,0001,056,000Allowance for Uncollectible Accounts, 12/31?23,000 cr.The $12,444,000 receivables balance was aged as follows:Age of Receivable Amount Percentage of Accounts Expected to Be Collected Under 31 days$4,321,00099%31260 days4,890,0009061290 days1,067,00080Over 90 days2,166,00060Assume that no accounts were written off during 20X2. Instructions a. Estimate the amount of Uncollectible Accounts as of December 31, 20X2. b. What is the companys Uncollectible Accounts expense for 20X2? c. Compute the net realizable value of Accounts Receivable at the end of 20X1 and 20X2. d. Compute the net realizable value at the end of 20X1 and 20X2 as a percentage of respective year-end receivables balances. Analyze your findings and comment on the presidents decision to close the credit evaluation department.