Question

Part III USING INFORMATION PROVIDED FROM PART 2 COMPLETE THE FOLOWING:

Carl Redmon decided to expand his business and begin selling accounting software, as well as providing consulting services. During January, Carl Redmon Consulting completed these transactions:

Jan   2   Completed a consulting engagement and received cash of $7,200.

          2   Prepaid three months’ office rent, $1,500.

          7   Purchased software inventory on account, $3,900, plus freight in, $100.

        15   Withdrew $500 for personal use.

        18   Sold software on account, $1,100 (cost $700).

        19   Consulted with a client for a fee of $900 on account.

        20   Paid the secretary’s salary for the month. ($4,000 for 30 days)

        21   Paid on account, $2,000.

        24   Paid utilities, $300.

        28   Sold software for cash, $600 (cost $400).

        31   Recorded these adjusting entries:

                a) Accrued salary expense.

                  b) Depreciation of computer and furniture.

                  c) Expiration of prepaid rent.

                  d) Expiration of prepaid insurance.   

                  e) Physical count of inventory, $2,800.

                  f)   Earned the remaining revenue from December 22.

                  g) Redmon estimates that 3% of inventory sold will be returned

Prepaid Insurance is for 2 years

Furniture originally cost $4,500. The furniture should last for five years.

Computer originally paid $2,400. It is expected to remain in service for five years, and have a $400 salvage value at the end of its useful life.

Required

1) Prepare journal entries for the above transactions and post these entries to the ledger.

2) Prepare adjusting entries on January 31 and post to the ledger.

3) Prepare an adjusted trial balance

4) Prepare closing entries at January 31, 2018 and post to the ledger.

5) Prepare a post-closing trial balance on January 31, 2018.

___________________________________________________________________________________________-

Redmon Consulting Adjusted Trial Balance December 31, 2017
	Balance
Account Title	Debit	Credit
Cash	$16350
Accounts receivable	$1500
Prepaid insurance	$5750
Supplies	$100
Office equipment	$2400
Accumulated depreciation- Office equipment		$33
Furniture	$4500
Accumulated depreciation- Furniture		$75
Accounts payable		$4700
Salaries payable		$1333
Unearned service revenue		$800
Redmon, Capital		$25000
Redmon, Withdrawals	$1600
Service Revenue		$3300
Insurance expense	$250
Supplies Expense	$400
Rent Expense	$750
Utilities expense	$200
Salaries expense	$1333
Depreciation Expense-Office Equipment	$33
Depreciation Expense-Furniture	$75
Total	$35241	$35241

Answer 1

Answer-

1- Journal Entries before adjustments:

For the period from 1 jan to 31 jan 2018

S.N.	Date	Particulars	Debit	Credit
a.	2Jan,2018	Cash Dr	$7200
		Consulting service Cr		$7200
		(being cash received against service fee)
b.	2Jan,2018	Office rent Dr	$500
		Prepaid Office Rent Dr	$1000
		Cash Cr		$1500
		(being office rent paid for three months 1 month as expenses and two month as prepaid i.e. recorded as current assets)
c.	7Jan,2018	Software(inventory) Dr	$3900
		Freight charges Dr	$100
		Vendor/supplier Cr		$4000
		(being inventory purchased on account)
d.	15Jan,2018	Drawings Dr	$500
		Cash Cr		$500
		(being cash withdrawl for personal use)
e.	18Jan,2018	Customer Dr	$1100
		Sales Cr		$1100
		(being software sold on account)
f.	19Jan,2018	Customer Dr	$900
		Consulting service Cr		$900
		(being consulting fees on account recorded)
g.	21Jan,2018	Employee(Secretary)    Dr	$2000
		Cash Cr		$2000
		(being salary paid to employee
h	24Jan,2018	Utilities a/c Dr	$300
		Cash Cr		$300
		(being payment made for utilities)
i.	28Jan,2018	Cash Dr	$600
		Sales Cr		$600
		(being software sold for cash)

Trial Balance before Adjustments:

For the period from 1 jan to 31 jan 2018

Particulars	Debit Amount	Particulars	Credit Amount
Cash account	$3500	Consulting service	$7200
Office Rent	$500	Sales (on11jan2018)	$1100
Prepaid Rent	$1000	Sales (on19jan2018)	$900
Inventory/Software	$3900	Sales (on 28jan2018)	$600
Freight	$100	Vendor/suppliers	$4000
Customer A	$1100
Customer B	$900
Salary	$2000
Utilities	$300
Drawings	$500
Total	$13800	Total	$13800

Since for Adjutment entries proper information has not been given in the question like for Accrued salary no amount has been given, for depreciation on computer and furnitures rate and value on which depreciation will be charged is not given. Some entries which can be prepared are as follows:

Estimated Sales Return(3% on sold software)

Sales Return a/c Dr. $ 51

Sales a/c Cr. $51

(being sales return from customer recorded)

($51= $1100+$600 *3%)

Answer-

1- Journal Entries before adjustments:

For the period from 1 jan to 31 jan 2018

S.N.	Date	Particulars	Debit	Credit
a.	2Jan,2018	Cash Dr	$7200
		Consulting service Cr		$7200
		(being cash received against service fee)
b.	2Jan,2018	Office rent Dr	$500
		Prepaid Office Rent Dr	$1000
		Cash Cr		$1500
		(being office rent paid for three months 1 month as expenses and two month as prepaid i.e. recorded as current assets)
c.	7Jan,2018	Software(inventory) Dr	$3900
		Freight charges Dr	$100
		Vendor/supplier Cr		$4000
		(being inventory purchased on account)
d.	15Jan,2018	Drawings Dr	$500
		Cash Cr		$500
		(being cash withdrawl for personal use)
e.	18Jan,2018	Customer Dr	$1100
		Sales Cr		$1100
		(being software sold on account)
f.	19Jan,2018	Customer Dr	$900
		Consulting service Cr		$900
		(being consulting fees on account recorded)
g.	21Jan,2018	Employee(Secretary)    Dr	$2000
		Cash Cr		$2000
		(being salary paid to employee
h	24Jan,2018	Utilities a/c Dr	$300
		Cash Cr		$300
		(being payment made for utilities)
i.	28Jan,2018	Cash Dr	$600
		Sales Cr		$600
		(being software sold for cash)

Trial Balance before Adjustments:

For the period from 1 jan to 31 jan 2018

Particulars	Debit Amount	Particulars	Credit Amount
Cash account	$3500	Consulting service	$7200
Office Rent	$500	Sales (on11jan2018)	$1100
Prepaid Rent	$1000	Sales (on19jan2018)	$900
Inventory/Software	$3900	Sales (on 28jan2018)	$600
Freight	$100	Vendor/suppliers	$4000
Customer A	$1100
Customer B	$900
Salary	$2000
Utilities	$300
Drawings	$500
Total	$13800	Total	$13800

Since for Adjutment entries proper information has not been given in the question like for Accrued salary no amount has been given, for depreciation on computer and furnitures rate and value on which depreciation will be charged is not given. Some entries which can be prepared are as follows:

Estimated Sales Return(3% on sold software)

Sales Return a/c Dr. $ 51

Sales a/c Cr. $51

(being sales return from customer recorded)

($51= $1100+$600 *3%)