*(Prepare Journal Entries) Date Description 2015 1-Jan Began business. Owners de
ID: 2456541 • Letter: #
Question
*(Prepare Journal Entries)
Date
Description
2015
1-Jan
Began business. Owners deposit $10,000 in exchange for 1,000 shares of $10.00 par value common stock.
10-Jan
Borrowed $25,000 from the bank. Signed a 2 year note with interest at 4.5%. Interest is payable June 30 and December 31 of each year.
12-Jan
Signed a lease agreement to rent office space for $975 per month, beginning Feb 1st. Nothing was paid today. (Question: do we owe rent for January?)
15-Jan
Purchased computer equipment for the office. Cost is $22,000. The equipment will be depreciated straight line over 5 years using ½ month for the month of purchase. Wrote check for payment. Depreciation for Jan to March will be $1,062.50. (Record depreciation in the adjusting entries.)
22-Jan
Hired an outside technician to set up the equipment. Received a bill for $3,500, which is due on Feb 22. (accounts payable) (Capitalize if it is part of the asset cost. Research this.)
15-Feb
Received the following bills due March 15: telephone $275, and rent for $975.
20-Feb
Paid the technician's bill from Jan 22.
01-Mar
Purchased computers as inventory to sell to customers. Purchased 50 computers at a cost of $800 each. Invoice is payable in 30 days. Shipping costs are included in the price.
12-Mar
Sold 10 computers to George's Woolens, Inc. at a price of $900 each. Also performed installation services. Sent client an invoice for $13,800. (The invoice total includes the computer sales and the installation services – there are two separate G/L income accounts. Also, perpetual inventory.)
15-Mar
Paid bills received Feb 15.
15-Mar
Received the following bills due April 15: telephone $345 and office supplies $760.
17-Mar
Completed a consulting project for Able Therapies, Inc. Sent client an invoice for $2,400.
20-Mar
Received a check for $5,000 from JAR Manufacturing as a deposit for an installation to be done in April.
22-Mar
Received payment for 50% of the invoice from George’s Woolens.
22-Mar
Paid three months of rent. Check amount is $2,925.
31-Mar
Completed a service project for Martha's Knitting Works. Sent client an invoice for $4,500. Used an outside consultant for this project, who will send an invoice to us for payment.
17-Mar
Received an invoice from an outside technician that we used for the George's Woolens screening done earlier. The invoice from this vendor was $1,800.
17-Mar
Paid outside technician $875 for work on the Able Therapies job that was completed earlier.
31-Mar
Have not yet received bills, but we know that the outside technician fees for Martha's will be $2,400.
28-Apr
Received a letter from George’s Woolens. They are having financial problems and are planning to file for protection under the bankruptcy laws. They are not likely to make any further payments.
* (Post the entries in your Journal to the General Ledger accounts. Be sure to post the debits and the credits. Check off each entry as you post it.)
* (On a separate sheet of paper, prepare a Trial Balance of the General Ledger as of March 31. Be sure that your ledger is in balance (i.e. debits = credits). Note that you will need to calculate the balance as of March 31 for each ledger account. The balances can be “penciled in” on the ledger pages.)
* (Prepare adjusting journal entries (in good form) for any adjustments as of March 31 that are needed to bring the books to their proper accrual basis amounts. (Remember depreciation expense, accrued expenses, prepaid expenses, unearned income, accounts receivable.)
* (Prepare another Trial Balance as of March 31. Label this one Adjusted Trial Balance.)
* (Prepare a Balance Sheet as of March 31 and an Income Statement and Statement of Retained Earnings for the three months ended March 31. Be sure to show current vs. long term assets and liabilities as appropriate. Also, prepare a schedule of outstanding Accounts Receivable.)
Date
Description
2015
1-Jan
Began business. Owners deposit $10,000 in exchange for 1,000 shares of $10.00 par value common stock.
10-Jan
Borrowed $25,000 from the bank. Signed a 2 year note with interest at 4.5%. Interest is payable June 30 and December 31 of each year.
12-Jan
Signed a lease agreement to rent office space for $975 per month, beginning Feb 1st. Nothing was paid today. (Question: do we owe rent for January?)
15-Jan
Purchased computer equipment for the office. Cost is $22,000. The equipment will be depreciated straight line over 5 years using ½ month for the month of purchase. Wrote check for payment. Depreciation for Jan to March will be $1,062.50. (Record depreciation in the adjusting entries.)
22-Jan
Hired an outside technician to set up the equipment. Received a bill for $3,500, which is due on Feb 22. (accounts payable) (Capitalize if it is part of the asset cost. Research this.)
15-Feb
Received the following bills due March 15: telephone $275, and rent for $975.
20-Feb
Paid the technician's bill from Jan 22.
01-Mar
Purchased computers as inventory to sell to customers. Purchased 50 computers at a cost of $800 each. Invoice is payable in 30 days. Shipping costs are included in the price.
12-Mar
Sold 10 computers to George's Woolens, Inc. at a price of $900 each. Also performed installation services. Sent client an invoice for $13,800. (The invoice total includes the computer sales and the installation services – there are two separate G/L income accounts. Also, perpetual inventory.)
15-Mar
Paid bills received Feb 15.
15-Mar
Received the following bills due April 15: telephone $345 and office supplies $760.
17-Mar
Completed a consulting project for Able Therapies, Inc. Sent client an invoice for $2,400.
20-Mar
Received a check for $5,000 from JAR Manufacturing as a deposit for an installation to be done in April.
22-Mar
Received payment for 50% of the invoice from George’s Woolens.
22-Mar
Paid three months of rent. Check amount is $2,925.
31-Mar
Completed a service project for Martha's Knitting Works. Sent client an invoice for $4,500. Used an outside consultant for this project, who will send an invoice to us for payment.
17-Mar
Received an invoice from an outside technician that we used for the George's Woolens screening done earlier. The invoice from this vendor was $1,800.
17-Mar
Paid outside technician $875 for work on the Able Therapies job that was completed earlier.
31-Mar
Have not yet received bills, but we know that the outside technician fees for Martha's will be $2,400.
28-Apr
Received a letter from George’s Woolens. They are having financial problems and are planning to file for protection under the bankruptcy laws. They are not likely to make any further payments.
Explanation / Answer
Accounting Entry Debit $ Credit $ Bank A/C ……………. Dr Equity Capital $10,000 $10,000 Bank A/C ……………. Dr 4.5% Bank Loan $25,000 $25,000 Rent Payable ……………Dr Rent Expense $975 $975 Computers………………… Dr Bank $22,000 $22,000 Computers…………………..Dr Technician $3,500 $3,500 Rent Payable ……………Dr Rent Expense $975 $975 Telephone Payable ……………Dr Telephone Expense $275 $275 Technician………………..Dr Bank $3,500 $3,500 Inventory…………………Dr Supplier A/c $40,000 $40,000 George's Woolens, Inc……………Dr Cogs Sales/Services $13,800 $9000 $4800 Telephone Expenses…… Dr Bank $275 $275 Telephone Payable ……………Dr Telephone Expense $345 $345 Office Supplies Payable ……………Dr Office Supplies $760 $760 Able Therapies……………………..Dr Sales/Service $2,400 $2,400 Customer Advances………………Dr Bank $5,000 $5,000 Bank…………………..Dr George Woolens $6,900 $6,900 Rent Expense……………………..Dr Bank $2,925 $2,925 Martha' s Knitting Works…………..Dr Sales/Service $4,500 $4,500 Consultancy Services…………………Dr To Technician 2 $1,800 $4,500 Technician 3………………..Dr Bank $875 $875 Consultancy Services…………………Dr To Technician 3 $875 $875 Consultancy Services…………………Dr To Technician 4 $2,400 $2,400 Bad Debts………………………………Dr George Woolens $6,900 $6,900 Depreciation $1,062.50 Computers $1,062.50 Interest on loan……………………………Dr $281 4.5% Bank Loan $281 Telephone Payable ……………Dr Telephone Expense $300 $300 COGS $9,000 Inventory $8,000 Gross Profit $1,000 Trial Balance Adjusted Debit Credit Inventory $32,000 Computers $22,000 Equity Capital $10,000 4.5% Bank Loan $25,281 Telephone Payable Provision $300 Bad Debts $6,900 Rent $2,925 Customer Advances $5,000 Martha's Knitting Works $4,500 Able Therapies $2,400 JAR Manufacturing $5,000 Telephone Expenses $920 Consultancy service Expenses $5,075 Technician 2 $1,800 Technician 4 $2,400 Bank $24,176 Sales/services $11,700 Depreciation $1,063 Office Supplies Payable $760 Office Supplies Expenses $760 $82,480 $82,480 Income Statement as on 31 - March Accounts Amounts Accounts Amounts Cost of Goods SOLD $8,000 Sales/services $20,700 Gross Profit $44,700 Closing Inventory $32,000 $52,700 $52,700 Consultancy Service Expenses $5,075 Gross Proffit b/d $44,700 Telephone Expenses $920 Bad Debts $6,900 Rent Expenses $2,925 Office Supplies $760 Depreciation $1,063 Interest on Bank Loan $281 Net Profit - Added To onwers Equity $26,776 $44,700 $44,700 Balance Sheet as at 31 march Liabilities and Capital Assets Owners Equity $10000 Computers 22000 Add : Profit carried over $26776 $36,776 Less Depreciation 1063 $20,938 4.5 % Bank Loan $25,281 Inventory $32,000 Dues to Technician 2 $1,800 Customer Advances $5,000 Dues to Technician 4 $2,400 Martha Knitting Works $4,500 Dues for Office Supplies $760 Able Therapies $2,400 telephone Expense Payable $645 Bank $7,826 JAR Manufacturing - Advance Received $5,000 $72,663 $72,663
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