The following transactions occurred during the year 1999: March 1, lawyer Abdula
ID: 2512862 • Letter: T
Question
The following transactions occurred during the year 1999:
March 1, lawyer Abdulaziz begins his own business as a real estate with a cash investment of 100,000$.
On March 2, $20000 was paid as a rent for the office.
On March 3, he purchased office equipment for10000$ paid 2000 cash and 8000 on credit.
On March 3, he purchased supplies for 500$ cash.
On march 3, $1500 was paid for advertising expenses
On March 20, he paid workers salaries s of $ 3,000 cash.
On March 1, Abdulaziz borrowed 10,000$ by signing 5%, one-year note on April1, 2000.
On march 23, Purchased a one-year fire insurance policy for 30,000$.
On march 23, he withdrew $ 1000 in cash for personal use.
On march 24, he performed a legal services for clients for $5000 cash
On march 25, he performed a legal service for client for $10000 of service he received cash of 6000 and it bill the balance 4000 on account.
On march 27,$500 paid cash as a payment of equipment credit
On march 29,hr received 1800 in cash from client who had been billed
Utilities expense incurred but not paid on March 31, 1999.250$.
On march 31, used office supply during the month $150
Adjustment data
The equipment purchased on March 3, 1999, is being depreciated using the straight-line method over 10 years, with a salvage value of $1,800.
Abdulaziz Law office estimates that uncollectible accounts receivable at year-end are $2200.
The short-term note is dated march 1, 1999, and carries a 5% interest rate.
prepar adjusted rtial balance and closing entry and financial statement
Explanation / Answer
Journal entries 1-Mar Cash $100,000 Capital $100,000 1-Mar Cash $10,000 Notes payable $10,000 2-Mar Rent $20,000 Cash $20,000 3-Mar Office Equipment $10,000 Cash $2,000 Accounts payable $8,000 3-Mar Supplies $500 Cash $500 3-Mar Advertising Expenses $1,500 Cash $1,500 20-Mar Salaries $3,000 Cash $3,000 23-Mar Prepaid Insurance $30,000 Cash $30,000 23-Mar Drawings $1,000 Cash $1,000 24-Mar Cash $5,000 Service revenue $5,000 25-Mar Cash $6,000 Accounts receivable $4,000 Service Revenue $10,000 27-Mar Accounts payable $500 Cash $500 29-Mar Cash $1,800 Accounts receivable $1,800 31-Mar Utilities expenses $250 Utilities payable $250 31-Mar Supplies expenses $150 Supplies $150 Adjusting entries 31-Mar Depreciation $68 Accumulated Depreciation $68 (Depreciation for 1 month) (10000-1800)/10 = $820 depreciation every year 820/12*1 = $68 depreciation per month 31-Mar Bad debts $2,200 Provision for Bad debts $2,200 31-Mar Interest expenses $42 Interest payable $42 (Interest on notes payable for 1 month) $10000 x 5% x 1/12 = 42 31-Mar Insurance expenses $2,500 Prepaid Insurance $2,500 (30000 x 1/12) 31-Mar Prepaid Rent $18,333 Rent $18,333 (assuming rent is paid for 1 year, 11 months rent transferred to prepaid account) Trial balance Particulars Debit Credit Cash $64,300 Accounts receivable $2,200 Provision of bad debts $2,200 Office Equipment $10,000 Accumulated Depreciation $68 Supplies $350 Prepaid Insuance $27,500 Prepaid Rent $18,333 Capital $100,000 Drawings $1,000 Notes Payable $10,000 Accounts payable $7,500 Utilities payable $250 Interest payable $42 Service Revenue $15,000 Rent $1,667 Advertising Expenses $1,500 Salaries $3,000 Insurance expenses $2,500 Utilities expenses $250 Supplies expenses $150 Depreciation $68 Bad debts $2,200 Interest expenses $42 Total $135,060 $135,060 Income Statement Service Revenue $15,000 Less: Operating expenses Rent $1,667 Advertising Expenses $1,500 Salaries $3,000 Insurance expenses $2,500 Utilities expenses $250 Supplies expenses $150 Depreciation $68 Bad debts $2,200 $11,335 Operating Income $3,665 Non operating expenses Interest expenses $42 Net profit $3,623 Closing Entries Income summary $15,000 Service Revenue $15,000 Rent $1,667 Advertising Expenses $1,500 Salaries $3,000 Insurance expenses $2,500 Utilities expenses $250 Supplies expenses $150 Depreciation $68 Bad debts $2,200 Interest expenses $42 Income summary $11,377 Retained Earning $3,623 Income Summary $3,623 Adjusted trial balance after closing entries Particulars Debit Credit Cash $64,300 Accounts receivable $2,200 Provision of bad debts $2,200 Office Equipment $10,000 Accumulated Depreciation $68 Supplies $350 Prepaid Insuance $27,500 Prepaid Rent $18,333 Capital $100,000 Drawings $1,000 Notes Payable $10,000 Accounts payable $7,500 Utilities payable $250 Interest payable $42 Retained Earnings $3,623 Total $123,683 $123,683 Balance sheet Assets Current Assets Cash $64,300 Accounts receivable (net of provision of bad debts) $0 Supplies $350 Prepaid Insurance $27,500 Prepaid Rent $18,333 Total Current Assets $110,483 Fixed Assets: Equipment $10,000 Less: accumulated Depreciation $68 $9,932 Total Assets $120,415 Liabilities Current liabilities: Notes Payable $10,000 Accounts payable $7,500 Utilities payable $250 Interest payable $42 Total Current Liabilities $17,792 Owners Equity Capital $100,000 Add: Retained earnings $3,623 Less: Drawings ($1,000) $102,623 Total Liabilities & Owners Equity $120,415
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