Question

For the past several years, Kelly Pitney has operated a part-time consulting business from her home. Kelly Pitney also buys and sells merchandise. As of April 1, 2006, Kelly decided to move to rented quarters and to operate the business, which was to be known as Hippocrates Consulting, on a full-time basis. Hippocrates Consulting entered into the following transactions during April:

April 1. The following assets were received from Kelly Pitney: cash, $13,100; accounts receivable, $3,000; merchandise $5,600; supplies, $1,400; and office equipment, $12,500. There were no liabilities received.

1. Paid three months' rent on a lease rental contract, $4,800.

2. Paid the premiums on property and casualty insurance policies, $1,800.

4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $5,000.

5. Purchased merchandise on account from Office Station Co., $2,000.

6. Received cash from clients on account, $1,800.

10. Paid cash for a newspaper advertisement, $120.

12. Paid Office Station Co. for part of the debt incurred on April 5, $1,200. ,

12. Recorded services provided on account for $4,200.

14. Paid part-time receptionist for two weeks' salary, $750.

17. Recorded cash from cash clients for fees earned during the period April 1-16, $6,250.

18. Paid cash for supplies, $800.

19. Sold merchandise for $3,000 in cash.

20. Recorded services provided on account for $2,100.

27. Paid part-time receptionist for two weeks' salary, $750.

29. Sold merchandise on account for $4,500.

30. Kelly withdrew $6,000 for personal use.

İNSTRUCTİONS

1. Journalize each transaction. (Use Periodic Inventory Method)

2. Post the journal to a ledger.

3. Prepare a unadjusted trial balance as of April 30, 2006.

4. Journalize and post the adjusting entries.

a. Insurance expired during April is $300.

b. Supplies on hand on April 30 are $1,350.

c. Depreciation of office equipment for April is $700.

d. Accrued receptionist salary on April 30 is $120.

e. Rent expired during April is $1,600.

f. Unearned fees on April 30 are $2,500.

g. Cost of merchandise on hand as of April 30 is $2,600.

5. Prepare an income statement, and a balance sheet.

6. Journalize and post the closing entries.

7. Prepare a post-closing trial balance.

Answer 1

Debit in $ Credit in $ 10190 Dr. 5000 120 Closing Enteries Date Particulars 30.4.2006 Income Summary a/c To Cost of goods sold To Advertisement Expense To Salary Expense To Insurance Expense To Supplies Expense To Depreciation Expense To Rent Expense (Expense accounts closed) 1620 300 850 700 1600 15050 7500 30.4.2006 Fees Earned a/c Dr. Sales a/c Dr. To Income Summary (Revenue accounts closed) 22550 12360 30.4.2006 Income Summary a/c Dr. To Kelly Pitney, Capital (Profits transferred) 12360 6000 30.4.2006 Kelly Pitney, Capital a/c Dr. To Kelly Pitney, Withdrawals (Withdrawals accounts closed 6000

Hippocrates Consulting Journal Enteries Date Particulars 1.4.2006 Cash a/c Dr. Accounts Receivable a/c Dr. Merchandise a/c Dr. Supplies a/c Dr. Office Equipment a/c Dr. To Kelly Pitney, Capital (Capital Invested) Debit in $ Credit in $ 13100 3000 5600 1400 12500 35600 4800 1.4.2006 Prepaid Rent a/c Dr. To Cash (3 month rent in advance) 4800 1800 2.4.2006 Prepaid Insurance a/c Dr. To Cash (Insurance premiums paid) 1800 Dr. 5000 4.4.2006 Cash a/c To Unearned Fees (Advance from client) 5000 2000 5.4.2006 Merchandise a/c Dr. To Accounts Payable (Merchandise on account) 2000 1800 6.4.2006 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 1800 120 10.4.2006 Advertisement Expense a/c Dr. To Cash (Expense paid) 120 1200 12.4.2006 Accounts Payable a/c Dr. To Cash (Creditors paid) 1200 4200 12.4.2006 Accounts Receivable a/c Dr. To Fees Earned (Fees earned on account) 4200

Adjusting Enteries Trans. Particulars a. Insurance Expense a/c To Prepaid Insurance (Insurance expired) Debit in $ Credit in $ 300 Dr. 300 b. Dr. 850 Supplies Expense a/c To Supplies (Supplies expensed) 1400 + 800 - 1350 850 C. 700 Depreciation Expense a/c Dr. To Accum Depre - Off.Equip. (To record depreciation) 700 d. Dr. 120 Salary Expense a/c To Salary Payable (Salary accrued) 120 e. Dr. 1600 Rent Expense a/c To Prepaid Rent (Rent expired) 1600 f. 2500 Unearned Fees a/c Dr. To Fees Earned (Fees earned ) 5000 - 2500 2500 Cost of goods sold a/c Dr. 5000 To Merchandise (To record cost of goods sold) 5600 + 2000 - 2600 5000

Worksheet For the period ending 30.4.2006 Unadjusted Adjustment Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 12930 12930 12930 12000 12000 12000 7600 5000 2600 2600 2200 850 1350 1350 4800 1600 3200 3200 1800 300 1500 1500 12500 12500 12500 700 700 700 800 800 800 120 120 120 5000 2500 2500 2500 Particulars Cash Accounts Receivable Merchandise Supplies Prepaid Rent Prepaid Insurance Office Equipment Accum Depre - Off.Equip. Accounts Payable Salary Payable Unearned Fees Kelly Pitney, Capital Kelly Pitney, Withdrawals Fees Earned Sales Cost of goods sold Advertisement Expense Salary Expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense Totals 35600 35600 41960 6000 6000 12550 2500 15050 7500 7500 5000 5000 120 120 1500 120 1620 300 300 850 850 700 1600 700 1600 62270 61450 61450 11070 11070 62270 46080 46080 0

7500 -5000 2500 Statement of Income For the period ending 30.4.2006 Sales Cost of goods sold Gross Profit Advertisement Expense Salary Expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense 120 1620 300 850 700 1600 5190 -2690 15050 Fees Earned Net Income 12360 Statement of Owner's Equity For the period ending 30.4.2006 Kelly Pitney, Capital Net Income 35600 Kelly Pitney, Withdrawals 12360 47960 -6000 41960

Balance sheet As at 30.4.2006 Assets Current Assets Cash Accounts Receivable Merchandise Supplies Prepaid Rent Prepaid Insurance Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Liabilities 12930 Accounts Payable 800 12000 Salary Payable 120 2600 Unearned Fees 2500 3420 1350 3200 1500 33580 12500 Non Current Assets Office Equipment Accum Depre - Off.Equ Total Assets -700 Owner's Equity 11800 Kelly Pitney, Capital 45380 Total Liabilities & Equity 41960 45380