On July 1, 2019, Tim Stein established his own accounting practice. Selected tra
ID: 2397322 • Letter: O
Question
On July 1, 2019, Tim Stein established his own accounting practice. Selected transactions for the first few days of July follow.
Signed a lease for an office and issued Check 101 for $13,800 to pay the rent in advance for six months.
Borrowed money from Second National Bank by issuing a four-month, 9 percent note for $32,000; received $31,040 because the bank deducted the interest in advance.
Signed an agreement with Carter Corp. to provide accounting and tax services for one year at $6,400 per month; received the entire fee of $76,800 in advance.
Purchased office equipment for $19,300 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,300 salvage value. The equipment will be depreciated using the straight-line method.
Purchased a one-year insurance policy and issued Check 102 for $1,668 to pay the entire premium.
Purchased office furniture for $14,640 from Furniture Warehouse; issued Check 103 for $8,440 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,200 salvage value. The office furniture will be depreciated using the straight-line method.
Purchased office supplies for $1,890 with Check 104. Assume $840 of supplies are on hand July 31, 2019.
Required:
Record the transactions in the general journal. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability for the year 2019.
Record the adjusting journal entries that must be made on July 31, 2019.
Analyze:
What balance should be reflected in Unearned Accounting Fees at July 31, 2019?
Signed a lease for an office and issued Check 101 for $13,800 to pay the rent in advance for six months.
1Borrowed money from Second National Bank by issuing a four-month, 9 percent note for $32,000; received $31,040 because the bank deducted the interest in advance.
1Signed an agreement with Carter Corp. to provide accounting and tax services for one year at $6,400 per month; received the entire fee of $76,800 in advance.
1Purchased office equipment for $19,300 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,300 salvage value. The equipment will be depreciated using the straight-line method.
1Purchased a one-year insurance policy and issued Check 102 for $1,668 to pay the entire premium.
3Purchased office furniture for $14,640 from Furniture Warehouse; issued Check 103 for $8,440 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,200 salvage value. The office furniture will be depreciated using the straight-line method.
5Purchased office supplies for $1,890 with Check 104. Assume $840 of supplies are on hand July 31, 2019.
Record the payment of rent. Record the borrowing Note: Enter debits before oredits Nobe: Enter debits before redts Jul 01, 2019 Ju01, 2019 Record entry Clear entry Vew general Record the fees received in advance. Journal entry worksheet Note: Enter debits beflore credits Record the purchase of equipment Ju01, 2019 Note Enter debits belore crets Record the payment.for insurance Note Er debits before credits Jul 01, 201 Record the purchase of furniture Note: Enter debits before credits Record the purchase of supplies Jul 03, 2019 Record entry Clear entry Visw general JoExplanation / Answer
Tim Stein
Journal entries
Transaction No
General Journal
Debit
Credit
1-Jul
Advance Rent
$ 13,800.00
Cash
$ 13,800.00
(Rent for 6 Months Paid In Advance)
1-Jul
Advance interest
$ 960.00
Cash
$ 31,040.00
Notes Payable 9%
$ 32,000.00
(Loan received from Bank)
1-Jul
Cash
$ 76,800.00
Unearned revenue
$ 76,800.00
(Income received in advance)
1-Jul
Equipment
$ 19,300.00
Notes Payable 12%
$ 19,300.00
(Equipment Purchased)
1-Jul
Advance Insurance
$ 1,668.00
Cash
$ 1,668.00
(Insurance Paid in Advance)
3-Jul
Furniture
$ 14,640.00
Cash
$ 8,440.00
Accounts Payable
$ 6,200.00
(Furniture Purchased)
5-Jul
Office Supplies
$ 1,890.00
Cash
$ 1,890.00
(Office Supplies Purchased)
Adjustment Entries
31-Jul
Rent
$ 2,300.00
Advance Rent
$ 2,300.00
(One month’s rent expenses)
31-Jul
Interest expense
$ 240.00
Advance Interest
$ 240.00
(interest expense on loan from bank)
31-Jul
Service Revenue
6400
Unearned Revenue
6400
(One month’s revenue earned)
31-Jul
Depreciation expense-Equipment
300
Accumulated Depreciation-Equipment
$ 300.00
(Depreciation on Equipment for 1 month)
31-Jul
Interest expense
$ 193.00
Interest Payable
$ 193.00
(interest expense on notes payable to Office Outfitters)
31-Jul
Insurance Expense
$ 139.00
Advance Insurance
$ 139.00
(One month’s Insurance Expired)
31-Jul
Depreciation expense-Furniture
$ 280.00
Accumulated Depreciation-Furniture
$ 280.00
(Depreciation on Equipment for 1 month)
31-Jul
Supplies Expense
$ 1,050.00
Office Supplies
$ 1,050.00
(Office supplies Consumed)
Unearned Accounting Fees July 31 2019 --- $ 70400.00
Tim Stein
Journal entries
Transaction No
General Journal
Debit
Credit
1-Jul
Advance Rent
$ 13,800.00
Cash
$ 13,800.00
(Rent for 6 Months Paid In Advance)
1-Jul
Advance interest
$ 960.00
Cash
$ 31,040.00
Notes Payable 9%
$ 32,000.00
(Loan received from Bank)
1-Jul
Cash
$ 76,800.00
Unearned revenue
$ 76,800.00
(Income received in advance)
1-Jul
Equipment
$ 19,300.00
Notes Payable 12%
$ 19,300.00
(Equipment Purchased)
1-Jul
Advance Insurance
$ 1,668.00
Cash
$ 1,668.00
(Insurance Paid in Advance)
3-Jul
Furniture
$ 14,640.00
Cash
$ 8,440.00
Accounts Payable
$ 6,200.00
(Furniture Purchased)
5-Jul
Office Supplies
$ 1,890.00
Cash
$ 1,890.00
(Office Supplies Purchased)
Adjustment Entries
31-Jul
Rent
$ 2,300.00
Advance Rent
$ 2,300.00
(One month’s rent expenses)
31-Jul
Interest expense
$ 240.00
Advance Interest
$ 240.00
(interest expense on loan from bank)
31-Jul
Service Revenue
6400
Unearned Revenue
6400
(One month’s revenue earned)
31-Jul
Depreciation expense-Equipment
300
Accumulated Depreciation-Equipment
$ 300.00
(Depreciation on Equipment for 1 month)
31-Jul
Interest expense
$ 193.00
Interest Payable
$ 193.00
(interest expense on notes payable to Office Outfitters)
31-Jul
Insurance Expense
$ 139.00
Advance Insurance
$ 139.00
(One month’s Insurance Expired)
31-Jul
Depreciation expense-Furniture
$ 280.00
Accumulated Depreciation-Furniture
$ 280.00
(Depreciation on Equipment for 1 month)
31-Jul
Supplies Expense
$ 1,050.00
Office Supplies
$ 1,050.00
(Office supplies Consumed)
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