Question

Other data:

Accrued but unrecorded and uncollected consulting fees earned at December 31 amount to: $27500.

The company determined that $16500 of previously unearned consulting fees had been earned at December 31.

Office supplies on hand at December 31 total $330

The company purchased all of its equipment when it first began business. At that time, the estimated useful life of the equipment was six years.

The company prepaid its nine-month rent agreement on June 1, 2020.

The company prepaid its six-month insurance policy on December 1, 2020

Accrued but unpaid salaries total $13200 at December 31,2020.

On September 1, 2020, the company borrowed $66000 by signing an eight-month, 4 percent note payable. The entire amount, plus interest, is due March 31, 2021.

Account                                                                                 Debit                             Credit

Cash                                                                                       304,150

Accounts Receivable                                                            99,000

Office supplies                                                                            880

Prepaid rent.                                                                           3,960

Unexpired insurance                                                              1,650

Office equipment                                                                  79,200

Accumulated depreciation: office equipment                                                        26,400

Accounts payable                                                                                                           4,400

Notes payable (due 3/1/12)                                                                                       66,000

Interest payable                                                                                                                 660

Income taxes payable                                                                                                    9,900

Dividends payable                                                                                                          3,500

Unearned consulting fees                                                                                           24,200

Capital stock                                                                                                                  220,000

Retained earnings                                                                                                         44,000

Dividends                                                                              3,500

Consulting fees earned                                                                                               550,000

Rent expense                                                                      16,170

Insurance expense                                                               2,420

Office supplies expense                                                      4,950

Depreciation expense: office equipment                      12,100

Salaries expense                                                                363,000

Utilities expense                                                                    5,280

Interest expense                                                                    3,300

Income taxes expense                                                        49,500

Totals                                                                                   949,060                      949,8060

Instructions:

1. Prepare the necessary adjusting journal entries on December 31, 2020. Also prepare an adjusted trial balance dated December 31, 2020 (20 points).
2. From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, 2020. Also prepare the company’s balance sheet dated December 31, 2020 (20 points).
3. Prepare the necessary year-end closing entries (15 points).
4. Prepare an after-closing trial balance (15 points).
5. Compute the company’s average monthly insurance expense for January through November 2020 (5 points).

Answer 1

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Workings for adjustments	Amount $	Note
Office supplies- Opening	880.00
Less: Office supplies- Closing	330.00
Office supplies expense	550.00
Office equipment	79,200.00	A
Life (Years)	6.00	B
Annual depreciation	13,200.00	C=A/B
Already booked	12,100.00
Depreciation to be booked	1,100.00
Prepaid rent	3,960.00	D
Period paid (months)	9.00	E
Monthly rent	440.00	F=D/E
Prepaid insurance	1,650.00	I
Period paid (months)	6.00	J
Monthly insurance	275.00	K=I/J
Insurance expense	275.00	See K
Loan amount	66,000.00	L
Interest rate	4%	M
Annual interest	2,640.00	N=L*M
Interest expense (Sep to Dec)	4.00	O
Interest expense	880.00	P=N/12*O
Answer 1- Adjusting Entries
Account	Debit $	Credit $
Accounts Receivable	27,500.00
Consulting Fees earned		27,500.00
Unearned Consulting Fees	16,500.00
Consulting Fees earned		16,500.00
Office Supplies Expense	550.00
Office Supplies		550.00
Depreciation Expense- Office equipment	1,100.00
Accumulated Depreciation- Office equipment		1,100.00
Rent Expense	440.00
Prepaid rent		440.00
Insurance Expense	275.00
Unexpired insurance		275.00
Salaries Expense	13,200.00
Salaries Payable		13,200.00
Interest Expense	880.00
Interest Payable		880.00

Answer 2
Adjusted Trial Balance	Unadjusted		Adjustments		Adjusted
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit
Cash	304,150.00				304,150.00
Accounts Receivable	99,000.00		27,500.00		126,500.00
Office Supplies	880.00			550.00	330.00
Prepaid rent	3,960.00			440.00	3,520.00
Unexpired insurance	1,650.00			275.00	1,375.00
Office equipment	79,200.00				79,200.00
Accumulated Depreciation, Office equipment		26,400.00		1,100.00		27,500.00
Accounts Payable		4,400.00				4,400.00
Notes Payable		66,000.00				66,000.00
Interest Payable		660.00		880.00		1,540.00
Income Taxes Payable		9,900.00				9,900.00
Dividends Payable		3,500.00				3,500.00
Unearned Consulting Fees		24,200.00	16,500.00			7,700.00
Capital Stock		220,000.00				220,000.00
Retained Earnings		44,000.00				44,000.00
Dividends	3,500.00				3,500.00
Consulting Fees earned		550,000.00		44,000.00		594,000.00
Rent Expense	16,170.00		440.00		16,610.00
Insurance Expense	2,420.00		275.00		2,695.00
Office Supplies Expense	4,950.00		550.00		5,500.00
Depreciation Expense, Office equipment	12,100.00		1,100.00		13,200.00
Salaries expense	363,000.00		13,200.00		376,200.00
Utilities expense	5,280.00				5,280.00
Interest Expense	3,300.00		880.00		4,180.00
Income Tax Expense	49,500.00				49,500.00
Salary Payable				13,200.00		13,200.00
Total	949,060.00	949,060.00	60,445.00	60,445.00	991,740.00	991,740.00

Income Statement	Amount $
Consulting fees earned	594,000.00
Less:
Rent Expense	16,610.00
Insurance Expense	2,695.00
Office Supplies Expense	5,500.00
Depreciation Expense, Office equipment	13,200.00
Salaries expense	376,200.00
Utilities expense	5,280.00
Interest Expense	4,180.00
Income Tax Expense	49,500.00
Net Income	120,835.00
Statement of Retained Earnings	Amount $
Retained Earnings- Opening Balance	44,000.00
Add: Net Income	120,835.00
Less: Dividends	3,500.00
Retained Earnings- Closing Balance	161,335.00

Balance Sheet	Amount $	Amount $
Current Assets
Cash	304,150.00
Accounts Receivable	126,500.00
Office Supplies	330.00
Prepaid rent	3,520.00
Unexpired insurance	1,375.00
Total Current Assets		435,875.00
Non Current Assets
Office Equipment	79,200.00
Less: Accumulated Depreciation	27,500.00
Fixed Assets		51,700.00
Total Assets		487,575.00
Liabilities & Stockholder's Equity
Liabilities	Amount $	Amount $
Current Liabilities
Accounts Payable	4,400.00
Notes Payable	66,000.00
Interest Payable	1,540.00
Income Taxes Payable	9,900.00
Dividends Payable	3,500.00
Salaries Payable	13,200.00
Unearned Consulting Fees	7,700.00
Current Liabilities		106,240.00
Non- Current Liabilities		-
Total Liabilities		106,240.00
Stockholder's Equity
Capital Stock	220,000.00
Retained Earnings	161,335.00
Stockholder's Equity		381,335.00
Total Liabilities & Stockholder's Equity		487,575.00