In: Accounting
ABC Corp. Balance Sheet As of December 31, 2018
Assets |
Liability |
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Cash |
$6,000 |
Accounts Payable |
$3,000 |
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Accounts Receivable |
$4,000 |
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Stockholders' Equity |
||||||
Common Stock |
$3,000 |
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Retained Earnings |
$4,000 |
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Total Liability and Stockholders' Equity |
||||||
Total Assets |
$10,000 |
$10,000 |
1. On January 1st, 2019, ABC Corp bought an equipment for $2,000. The equipment has a useful life of 5 years and has a salvage value of $500. The company uses double-declining depreciation method.
2. On March 1 st, 2019, ABC Corp received $2,400 cash for services to be performed in the future. The service agreement is for a period of two years and the service will be performed evenly throughout the two-year period starting from March 1 st, 2019.
3. On July 1st, 2019, ABC Corp paid $600 for a one-year insurance policy. The policy starts on July 1st, 2019 and ends on June 30th, 2020
Please indicate whether an account is an asset (A), liability (L), or equity (E) for journal entries, adjusting entries, and closing entries to receive full credits.
⚫ Make journal entries for the follow transactions. (1 point each)
⚫ Prepare the unadjusted trial balance. (1 point)
⚫ Make the appropriate adjusting entries at year end. (1 point each)
⚫ Prepare the adjusted trial balance (1 point)
⚫ Make the appropriate closing entries. Hint: close it directly to retained earnings. (1 point each)
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Date | Account title and Explanation | Debit $ | Credit $ |
January 1 | Equipment | 2,000 | |
Cash | 2,000 | ||
(To record the purchase of equipment for cash) | |||
March 1 | Cash | 2,400 | |
Unearned Service Income | 2,400 | ||
(To record the advance receipt from customer for service to be performed over a period of two year) | |||
July 1 | Prepaid Insurance | 600 | |
Cash | 600 | ||
(To record the prepaid insurance) | |||
ABC Corp. | |||
Unadjusted Trial Balance | |||
Account Name | Debit $ | Credit $ | |
Cash | 5,800 | ||
Accounts Receivable | 4,000 | ||
Prepaid Insurance | 600 | ||
Equipment | 2,000 | ||
Accounts Payable | 3,000 | ||
Unearned Service Income | 2,400 | ||
Common Stock | 3,000 | ||
Retained Earning | 4,000 | ||
Total | 12,400 | 12,400 | |
Date | Account title and Explanation | Debit $ | Credit $ |
December 31 | Depreciation Expenses -Equipment | 600 | |
Accumulated Depreciation - Equipment | 600 | ||
(To record the depreciation for the year) | |||
December 31 | Unearned Service Income | 1,000 | |
Service Income | 1,000 | ||
(To record the service income from March 1 to December 31) | |||
December 31 | Insurance Expenses | 300 | |
Prepaid Insurance | 300 | ||
(To record the prepaid insurance) | |||
ABC Corp. | |||
Unadjusted Trial Balance | |||
Account Name | Debit $ | Credit $ | |
Cash | 5,800 | ||
Accounts Receivable | 4,000 | ||
Prepaid Insurance | 300 | ||
Equipment | 2,000 | ||
Accumulated Depreciation - Equipment | 600 | ||
Accounts Payable | 3,000 | ||
Unearned Service Income | 1,400 | ||
Common Stock | 3,000 | ||
Retained Earning | 4,000 | ||
Service Income | 1,000 | ||
Depreciation Expenses -Equipment | 600 | ||
Insurance Expenses | 300 | ||
Total | 13,000 | 13,000 | |
Date | Account title and Explanation | Debit $ | Credit $ |
December 31 | Income Summary | 900 | |
Depreciation Expenses -Equipment | 600 | ||
Insurance Expenses | 300 | ||
(To record the closing the expenses accounts) | |||
December 31 | Service Income | 1,000 | |
Income Summary | 1,000 | ||
(To record the closing the service income) | |||
December 31 | Income Summary | 100 | |
Retained Earning | 100 | ||
(To record the closing of income summary account) | |||