Mr. Wayne started a new Accounting company that performs accounting services for
ID: 2563263 • Letter: M
Question
Mr. Wayne started a new Accounting company that performs accounting services for small to mid-size businesses in his area. The following are a list of transactions that occurred in the first month of operations for Batman Accounting Services, Inc. a subchapter S corporation:
May 1
Mr. Wayne deposited $200,000 of his personal money into the business savings account.
2
The Corporation signs an agreement to rent an office space for $1,200 per month, with the first 6 months due at the time of signing
2
Mr. Wayne contributed a computer worth $1,500 and a desk worth $3,500 to the Corporation
2
The Corporation bought $300 worth of miscellaneous office supplies such as pens, pencils and paper
2
The Corporation bought a printer for $800
3
The Corporation paid Robin $500 to produce a commercial promoting the Corporation
4
The Corporation paid $2,300 in airfare for Mr. Wayne to attend a CPA conference in Washington DC
4
The Corporation paid $800 for a hotel in Washington DC for 4 nights so Mr. Wayne could attend the CPA conference.
6
Mr. Wayne spent $120 out of the Corporation's bank account on a pair of shoes
10
The Corporation reimbursed Mr. Wayne $1,300 for meals spent in Washington DC
15
The Corporation hires Mr. Freeze as the Senior Accountant for $25 an hour
15
Mr. Wayne bills Mr. Joker $450 for monthly bookkeeping services
15
Mr. Wayne bills Ms. Ivy $600 for monthly bookkeeping services and payroll preparation
20
Mr. Wayne bills Mr. Face $550 for preparation of his 2015 tax return.
30
The Corporation paid $200 for utilities
30
The Corporation paid $125 for the telephone service
30
The Corporation accepted a credit payment from Mr. Joker for $450, but incurred a $5 credit service fee and received $445 in cash
30
The Corporation received a notice from the Court that Mr. Face was granted bankruptcy and is not mandatory to pay his amount due.
30
The Corporation received an invoice for miscellaneous office supplies for $425
31
The Corporation billed miscellaneous clients in the total amount of $12,500.
31
The Corporation paid wages for the month of May which consisted of the following:
Wages
$2,400
Employer Payroll Taxes to be paid next month
$703
Employee taxes paid by the employer due next month
$476
Cash paid out on the 31st
$1,924
Note: Remember your adjusting entries.
The company elects to use the straight line depreciation method with the computers and printer having a 3 year life and the desk having a 5 year life. (Round to the nearest whole dollar)
Assuming the Corporation is on an Accrual Basis of accounting, prepare a 5 column trial balance. This should include the unadjusted trial balance, adjustments, adjusted trial balance, balance sheet and income statement. Then prepare, in good form (i.e. correct heading titles), the Balance Sheet, Income Statement and Statement of Owners Equity.
Finally, write a short evaluation about the company and where you think the company is heading. Include in your evaluation if you think the company is profitable and where do you think the company can save money or ways the company can improve revenue.
May 1
Mr. Wayne deposited $200,000 of his personal money into the business savings account.
2
The Corporation signs an agreement to rent an office space for $1,200 per month, with the first 6 months due at the time of signing
2
Mr. Wayne contributed a computer worth $1,500 and a desk worth $3,500 to the Corporation
2
The Corporation bought $300 worth of miscellaneous office supplies such as pens, pencils and paper
2
The Corporation bought a printer for $800
3
The Corporation paid Robin $500 to produce a commercial promoting the Corporation
4
The Corporation paid $2,300 in airfare for Mr. Wayne to attend a CPA conference in Washington DC
4
The Corporation paid $800 for a hotel in Washington DC for 4 nights so Mr. Wayne could attend the CPA conference.
6
Mr. Wayne spent $120 out of the Corporation's bank account on a pair of shoes
10
The Corporation reimbursed Mr. Wayne $1,300 for meals spent in Washington DC
15
The Corporation hires Mr. Freeze as the Senior Accountant for $25 an hour
15
Mr. Wayne bills Mr. Joker $450 for monthly bookkeeping services
15
Mr. Wayne bills Ms. Ivy $600 for monthly bookkeeping services and payroll preparation
20
Mr. Wayne bills Mr. Face $550 for preparation of his 2015 tax return.
30
The Corporation paid $200 for utilities
30
The Corporation paid $125 for the telephone service
30
The Corporation accepted a credit payment from Mr. Joker for $450, but incurred a $5 credit service fee and received $445 in cash
30
The Corporation received a notice from the Court that Mr. Face was granted bankruptcy and is not mandatory to pay his amount due.
30
The Corporation received an invoice for miscellaneous office supplies for $425
31
The Corporation billed miscellaneous clients in the total amount of $12,500.
31
The Corporation paid wages for the month of May which consisted of the following:
Wages
$2,400
Employer Payroll Taxes to be paid next month
$703
Employee taxes paid by the employer due next month
$476
Cash paid out on the 31st
$1,924
Note: Remember your adjusting entries.
The company elects to use the straight line depreciation method with the computers and printer having a 3 year life and the desk having a 5 year life. (Round to the nearest whole dollar)
Explanation / Answer
Date
Particulars
Dr. Amount (Amount in $)
Cr. Amount (Amount in $)
May 1
Cash at Bank
TO Capital Account
200,000
2,00,000
2
Rent Expense
Prepaid Rent
TO Rent Payable
1,200
6,000
7,200
2
Computer
Office Equipment
TO Capital Account
1,500
3,500
5,000
2
Office Supplies
TO Cash at Bank
300
300
2
Printer
TO Cash at Bank
800
800
3
Advertising Expense
TO Cash at Bank
500
500
4
Travelling Expense
TO Cash at Bank
2,300
2,300
4
Boarding & Lodging Expense
TO Cash at Bank
800
800
6
Capital Account
TO Cash at Bank
120
120
10
Travelling Expense
TO Cash at Bank
1,300
1,300
15
No Entry for hiring the accountant, wages expense will be made at the end of the month when the salary becomes due
15
Accounts Receivable
TO Revenue Account
450
450
15
Accounts Receivable
TO Revenue Account
600
600
20
Accounts Receivable
TO Revenue Account
550
550
30
Utilities Expense
TO Cash at Bank
200
200
30
Telephone Expense
TO Cash at Bank
125
125
30
Cash at Bank
Service Fee Expense
TO Accounts Receivable
445
5
450
30
Bad Debt Account
TO Accounts Receivable
550
550
30
Office Supplies
TO Accounts Payable
425`
425
31
Accounts Receivable
TO Revenue Account
12,500
12,500
31
Salary & Wages Expense
TO Tax Payable
TO Cash at Bank
2,400
476
1,924
31
Payroll Tax Expense
TO Tax Payable
703
703
Adjustment Entries
31
Depreciation on Computer
TO Computer
($1500 / 3 /12)
42
42
31
Depreciation on Printer
TO Printer
($800 / 3 / 12)
22
22
31
Depreciation on Office Equipment
TO office Equipment
($3,500 / 3 /12)
58
58
TRIAL BALANCE FOR THE PERIOD
Unadjusted Trial Balance
Adjustments
Adjusted Trial Balance
Account Head
Debit Amount (Amount in $)
Credit Amount (Amount in $)
Debit Amount (Amount in $)
Credit Amount (Amount in $)
Debit Amount (Amount in $)
Credit Amount (Amount in $)
Balance Sheet
ASSETS
Cash at Bank
192,076
192,076
Computer
1,500
42
1,458
Office Equipment
3,500
58
3,442
Printer
800
22
778
Accounts Receivable
13,100
13,100
Prepaid Rent
6,000
6,000
Equity & Liabilities
Capital Account
204,880
204,880
Rent Payable
7,200
7,200
Accounts Payable
425
425
Tax Payable
1,179
1179
Income Statement
Revenue
Revenue Account
14,100
14,100
Expenses
Salary & Wages Expense
2,400
2,400
Rent Expense
1,200
1,200
Office Supplies
725
725
Advertising Expense
500
500
Travelling Expense
3,600
3,600
Boarding & Lodging Expense
800
800
Utilities Expense
200
200
Telephone Expense
125
125
Service Fee Expense
5
5
Bad Debt Account
550
550
Payroll Tax Expense
703
703
Depreciation on Computer
42
42
Depreciation on Printer
22
22
Depreciation on Office Equipment
58
58
TOTAL
227,784
227,784
122
122
227,906
227,906
Income Statement for May
Particulars
Amount (In $)
Revenue
Sales Revenue
14,100
TOTAL
14,100
Expenses
Salary & Wages Expense
2,400
Rent Expense
1,200
Office Supplies
725
Advertising Expense
500
Travelling Expense
3,600
Boarding & Lodging Expense
800
Utilities Expense
200
Telephone Expense
125
Service Fee Expense
5
Bad Debt Account
550
Payroll Tax Expense
703
Depreciation on Computer
42
Depreciation on Printer
22
Depreciation on Office Equipment
58
TOTAL Expenses
10,930
Net Income
3,170
Balance Sheet as at 31st May 2017
Assets
Amount (In $)
Equity & Liabilities
Amount (In $)
Cash at Bank
192,076
Capital Account
204,880
Computer
1,458
Net Income
3,170
Office Equipment
3,442
Rent Payable
7,200
Printer
778
Accounts Payable
425
Accounts Receivable
13,100
Tax Payable
1,179
Prepaid Rent
6,000
TOTAL
216,854
TOTAL
216,854
Date
Particulars
Dr. Amount (Amount in $)
Cr. Amount (Amount in $)
May 1
Cash at Bank
TO Capital Account
200,000
2,00,000
2
Rent Expense
Prepaid Rent
TO Rent Payable
1,200
6,000
7,200
2
Computer
Office Equipment
TO Capital Account
1,500
3,500
5,000
2
Office Supplies
TO Cash at Bank
300
300
2
Printer
TO Cash at Bank
800
800
3
Advertising Expense
TO Cash at Bank
500
500
4
Travelling Expense
TO Cash at Bank
2,300
2,300
4
Boarding & Lodging Expense
TO Cash at Bank
800
800
6
Capital Account
TO Cash at Bank
120
120
10
Travelling Expense
TO Cash at Bank
1,300
1,300
15
No Entry for hiring the accountant, wages expense will be made at the end of the month when the salary becomes due
15
Accounts Receivable
TO Revenue Account
450
450
15
Accounts Receivable
TO Revenue Account
600
600
20
Accounts Receivable
TO Revenue Account
550
550
30
Utilities Expense
TO Cash at Bank
200
200
30
Telephone Expense
TO Cash at Bank
125
125
30
Cash at Bank
Service Fee Expense
TO Accounts Receivable
445
5
450
30
Bad Debt Account
TO Accounts Receivable
550
550
30
Office Supplies
TO Accounts Payable
425`
425
31
Accounts Receivable
TO Revenue Account
12,500
12,500
31
Salary & Wages Expense
TO Tax Payable
TO Cash at Bank
2,400
476
1,924
31
Payroll Tax Expense
TO Tax Payable
703
703
Adjustment Entries
31
Depreciation on Computer
TO Computer
($1500 / 3 /12)
42
42
31
Depreciation on Printer
TO Printer
($800 / 3 / 12)
22
22
31
Depreciation on Office Equipment
TO office Equipment
($3,500 / 3 /12)
58
58
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