Question

1. Jan. 1: Xenon issued $40,000 of common stock.

2. Jan. 1: Xenon paid $18,000 cash to purchase an equipment. The equipment has an estimated useful life of 5 years and an estimated salvage value of $3,000.

3. Jan. 1: Xenon paid $7,000 cash for two years of insurance coverage starting on Jan. 1, 2020.

4. March 1:Xenon rented a building and paid $2,400 for one year’s rent (starting 3/1).

5. April 1: Xenon purchased $5,700 of inventory on account.

6. June 1: Xenon sold $23,000 of software on account. The cost is $3,500.

7. Sept. 1: Xenon collected $7,000 cash from its customers for the previous sales on account.

8. Oct 31: Xenon paid $5,000 cash for employee wages earned during the first ten months (Jan 1 to October 31, $500 per month).

9. Nov 1: Xenon paid $3,300 cash to suppliers for inventory purchases made on account.

10. Dec 1: Xenon started an on-line service where customers pay an annual subscription fee when they sign up for a 12-month service plan. On Dec. 1, Xenon received $3,600 of cash from customers for one year of subscription fees (for online services from Dec 1, 2020 to Nov 30, 2021).

Additional Info:

-Xenon uses Straight Line Depreciation

-Two months of employee wages was accrued on Dec. 31, 2020. Xenon plans to pay employees Jan. 1 2021

Questions

1. Journal entry for the above

2. Adjusting (There are 5) entry for the above

3. Closing entry for the above

Answer 1

1)	Journal Entries
	Date	Particulars			Debit	Credit
	01-Jan	Cash			$ 40,000.00
		To Common Stock				$ 40,000.00
	01-Jan	Equipment			$ 18,000.00
		To Cash				$ 18,000.00
	01-Jan	Prepaid Insurance			$   7,000.00
		To Cash				$   7,000.00
	01-Mar	Prepaid Rent			$   2,400.00
		To Cash				$   2,400.00
	01-Apr	Inventory			$   5,700.00
		To Accounts Payable				$   5,700.00
	01-Jun	Accounts Receivable			$ 23,000.00
		To Revenue from Sales				$ 23,000.00
		Cost of Goods sold			$   3,500.00
		To Inventory				$   3,500.00
	01-Sep	Cash			$   7,000.00
		To Accounts Receivable				$   7,000.00
	31-Oct	Wages Expense			$   5,000.00
		To Cash				$   5,000.00
	01-Nov	Accounts Payable			$   3,300.00
		To Cash				$   3,300.00
	01-Dec	No entry
	01-Dec	Cash			$   3,600.00
		To Unearned Revenue				$   3,600.00

2)	Adjusting Entries
	Date	Particulars			Debit	Credit
	Dec-31	Depreciation Expense			$ 3,000.00
		To Accumulated Depreciation				$ 3,000.00
		[($ 18000 - $ 3000) / 5 ]
	Dec-31	Insurance Expense			$ 3,500.00
		To Prepaid Insurance				$ 3,500.00
		($ 7000 / 2)
	Dec-31	Rent Expense			$ 2,000.00
		To Prepaid Rent				$ 2,000.00
		($ 2400 x 10/12)
	Dec-31	Wages Expense			$ 1,000.00
		To Wages Payable				$ 1,000.00
		($ 500 x 2)
	Dec-31	Unearned Revenue			$    300.00
		To Revenue from Subscription				$    300.00
		($ 3600 x 1/12)

3)	Closing Entries
	Date	Particulars			Debit	Credit
	Dec-31	Revenue from Sales			$ 23,000.00
		Revenue from Subscription			$      300.00
		To Income Summary				$ 23,300.00
	Dec-31	Income Summary			$ 14,500.00
		To Wages Expense				$   6,000.00
		To Depreciation Expense				$   3,000.00
		To Insurance Expense				$   3,500.00
		To Rent Expense				$   2,000.00
	Dec-31	Income Summary			$   8,800.00
		To Retained Earnings				$   8,800.00

Summary of T- Accounts
Particulars			Debit	Credit
Cash			$ 14,900.00
Inventory			$   2,200.00
Accounts Receivable			$ 16,000.00
Prepaid Insurance			$   3,500.00
Prepaid Rent			$      400.00
Equipment			$ 18,000.00
Accumulated Depreciation				$   3,000.00
Accounts Payable				$   2,400.00
Unearned Revenue				$   3,300.00
Wages Payable				$   1,000.00
Common Stock				$ 40,000.00
Retained Earnings				$   5,300.00
Totals			$55,000.00	$55,000.00