Comprehensive Computer Program, Page 6 The Corporation performs adjusting entrie

Question

Comprehensive Computer Program, Page 6 The Corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December the following transactions occurred Dec. 1 Issued 20,000 shares of capital stock to Paula Petersen and other investors in exchange for a total of $40,000 cash. Dec. 1 Paid $9,600 to Mages Realty for 12 months rent paid in advance. (Use the Asset account Prepaid Rent for the entire amount). Dec. 2 Purchased plumbing repair equipment and tools from Host Corp. for $15,000 (use the ac count Plumbing Equipment). Paid $,.000 in cash with the balance due on a Note Payable (principal and interest due in 6 months). Dec. 4 Purchased office supplies on Account from Clousers for $1,000. Payment is due in 15 days. These supplies are expected to last for several months. Dec. 5 Purchased a 6 month business Insurance Policy for $1,200 from the Seyler Agency (use the Asset account Unexpired Insurance for the entire amount) Dec. 10 Received $4,000 cash from the Wink Apartment Complex in Exeter Township as advance payment for services to be provided. (Use the Liability account: Unearned Plumbing Fees.) Dec. 16 Paid employee salaries for the first two weeks of December, $2,000. Dec. 16 Earned s7,500 in fees for plumbing repairs completed in the first two weeks of December. $3,000 was received in cash and the remainder was billed to PPI's customers on Account (due in 10 days.) Dec. 19 Paid the amount due to Clousers on account from the Dec. 4th purchase. Dec. 26 Received amount due on account from the December 16th billing. Dec. 27 PPI was named, along with Mages Agency, as a co-defendant in a $15,000 lawsuit filed on behalf of Joseph Walker. Walker slipped on ice outside of the shop and broke his leg. The extent of the Corporation's legal and financial responsibility, if any, can not be determined at this time. (Note: this event does not need a journal entry at this time, but may require disclosure in the notes accompanying the financial statements, Dec. 30 Received a phone bill for the month of December from Sprint in the amount of $300. The amount is due on January 15, 2017. Dec. 30 Declared a cash dividend of $.05 (5 cents) per share, payable on January 15, 2017. Dec. 31 Earned $9,000 in fees for plumbing repairs provided for the second two weeks of December. $4,000 was received in cash and the remainder was billed to PPI's customers on Account (due in 12 days.)

Explanation / Answer

let us go step by step

1. Journal entries in the books of paulas plumbing for the month of December

(Amount in Dollars) DATE PARTICULARS DR. AMOUNT CR. AMOUNT 1-Dec cash a/c ……….. Dr 40000              to equity share application account 40000 (Being equity shares issued and application money received) 1-Dec equity share application account…………………Dr 40000              to equity share capital account 40000 (Being equity share application money transferred to equity share capital account) 1-Dec rent expenses account …………Dr 800 prepaid rent account…………Dr 8800 to cah account 9600 (Being rent expenses for the month of Dec only transferred to Profit and loss account (9600*1/12) 2-Dec plumbing equipments a/c …………..Dr 15000 to cash account 5000 to note payable account 10000 (Being plumbing equipments purchased) 4-Dec office supplies a/ c …………………Dr 1000 to creditors A/C 1000 (Being office supplies purchased on credit , payable in 15 days) 5-Dec Insurance expenses account …………Dr 200 unexpired insurance account ……….Dr 1000 to cash account 1200 (Being insurance expenses for the month of Dec transferred to the profit and loss account ) ( 1200*1/6) 10-Dec Cash a/c …………. Dr 4000 to enearned plumbing fees A/C 4000 (Being advance plumbing fees received) 16-Dec employee salaries expenses a/c ………Dr 2000 to cash a/c 2000 (Being employees salaries for first two months paid off) 16-Dec cash a/c dr 3000 customer PPI a./c dr 4500 to plumbing fees earned account 7500 (Being plumbing fees earned and received partially in cash balace to PPI account) 19-Dec creditors account ………Dr 1000 to cash account 1000 (Being payment for office supplies purchased on dec 4) 26-Dec cash account ………… Dr 4500 to customer PPI account 4500 (Being balance amount which were transferred to customer ppi account on dec 16 received) 30-Dec Telephone bill expenses a/c …………Dr 300 to telephone bill payable a/c 300 (Being telephone bill payable for the month of Dec) 31-Dec cash a/c ……….. Dr 4000 customer PPI a/c ……..Dr 5000 to plumbing fees earned account 9000 (Being plumbing fees earned and received part of it in cash balance transferred to customer PPI a/c) 31-Dec Interest on note a/c ………. Dr 50 to interest payable account 50 (Being interest for the month on note payable) (10000*6%*1/*12) 31-Dec depreciatioin account ……..Dr 62.5 to plumbing equipments account 62.5 (Being Depreciation for the month on plumbing equipments being provided) (15000*5%*1/12) 31-Dec unerned plumbing fees a/c ………Dr 1000 to plumbing fees earned account 1000 (Being plumbing fees received) 31-Dec income tax expense a/c ……….. Dr 2500 To income tax payable account 2500 (Being income tax payable) 31-Dec salaries expenses account ………. Dr 2200 To Salaries payable account 2200 (Being salaries payable for the period not paid in the month of dec) Total 140912.5 140912.5 STEP 2 TRIAL BALANCE ( From ledger closing balances) NAME OF ACCOUNT DR CR CASH ACCOUNT 36700 EQUITY SHARE CAPITAL ACCOUNT 40000 RENT EXPENSES ACCOUNT 800 PREPAID RENT ACCOUNT 8800 PLUMBING EQUIPMENTS 14937.5 NOTE PAYABLE 10000 OFFICE SUPPLIES 1000 INSURANCE EXPENSES 200 UNEXPIRED INSURANCE ACCOUNT 1000 UNEARNED PLUMBING FEES 3000 EMPLOYEES SALARIES EXPENSES 4200 CUSTOMER PPI 5000 PLUMBING FEES EARNED 17500 TELEPHONE BILL EXPENSES 300 TELEPHONE BILL PAYABLE 300 INTEREST ON NOTE EXPENSE 50 INTEREST PAYABLE 50 DEPRECIATION EXPENSE 62.5 SALARIES PAYABLE 2200 INCOME TAX EXPENSE 2500 INCOME TAX PAYABLE 2500 CLOSING STOCK 600 STEP 3 STATEMENT OF RETAINED EARNINGS PATICULARS AMOUNT AMOUNT RETAINED EARNING AS ON 1 ST OF DECEMBER 0 ADD EARNING FOR THE MONTH OF DECEMBER 8987.5 (from above trial balance prepaired profit and loss account) less Divident paid off 0 (do not take the decleared divident which is not actually paid) RETAINED EARNINGS AS ON 31 ST DEC( CLOSING BALANCE) 8987.5 (transferred to the equity share capital account)

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