Question

. The following events apply to the first year of operations for Mestro Financial Services Company:

1. Acquired $28,000 cash by issuing common stock on January 1, 2018.

2. Purchased $1,000 of supplies on account.

3. Paid $12,000 cask in advance for a one-year lease on office space.

4. Earned $23,000 of consulting revenue on account.

5. Incurred $16,000 of general operating expenses on account.

6. Collected $20,000 cash from receivables.

7. Paid $13,000 cash on accounts payable.

8. Paid a $1,000 cash dividend to stockholders.

9. There was $200 of supplies on hand.

10. The one-year lease on the office space was effective beginning on October 1, 2018.

11. There was $1,200 of accrued salaries at the end of 2018.

Required:

A. Record the preceding events in general journal format.

B. Post the transaction data from the general journal into general ledger T-accounts.

C. Prepare an adjusted trial balance.

D. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

E. Prepare the appropriate closing entries in general journal format.

Answer 1

ans 1	re
Date	Accounts Title	Dr	Cr
1	Cash	$28,000
	Common stock		$28,000
2	Supplies	$1,000
	Accounts Payable		$1,000
3	Prepaid Rent	$12,000
	Cash		$12,000
4	Accounts Receivable	$23,000
	Consulting Revenue		$23,000
5	General operating expenses	$16,000
	Accounts Payable		$16,000
6	Cash	$20,000
	Accounts Receivable		$20,000
7	Accounts Payable	$13,000
	Cash		$13,000
8	Cash dividend	$1,000
	Cash		$1,000
9	Supplies expenses	$800
	Supplies (1000-200)		$800
10	Rent expenses (1200/12*3)	$3,000
	Prepaid Rent		$3,000
11	salaries expenses	1200
	salaries payable		1200

ans 2
	Cash
1	28000	3	12000
6	20000	7	13000
end bal	22000	8	1000
	Common stock
		1	28000
	Supplies
3	1000	9	800
end bal	200
	Accounts payable
7	13000	3	1000
		5	16000
		end bal	4000
	Prepaid rent
3	12000	10	3000
end bal	9000
	Accounst receivable
4	23000	6	20000
end bal	3000
	General opearting exp
5	16000
	Rent expenses
10	3000
	Salaries expenses
11	1200

ans 3	Adjusted Trialbalance
		DR	Cr
	Cash	22000
	Accounst receivable	3000
	Prepaid Rent	9000
	Supplies	200
	Acounts payable		4000
	Salaries payable		1200
	Common stock		28000
	Retained Eranings		0
	Cash dividend	1000
	Consulting Revenue		$23,000
	Operating expenses
	Supplies expenses	$800
	Rent expenses	$3,000
	salaries expenses	1200
	General operating expenses	$16,000
	Total	56200	56200
	Income statement
	Consulting Revenue		$23,000
	Operating expenses
	Supplies expenses	$800
	Rent expenses	$3,000
	salaries expenses	1200
	General operating expenses	$16,000	$21,000
	Net income		$2,000
	Statement of change in stockholder equity
	Beginning bal	0
	Add: Issuance	28000
	Add: net income	2000
	Less: dividend	($1,000)
	ending bal	29000
	Balance sheet
	Assets
	Current assets
	Cash	22000
	Accounst receivable	3000
	Prepaid Rent	9000
	Supplies	200
	Total assets	34200
	Liabilities & stockholder equity
	Acounts payable	4000
	Salaries payable	1200
	Total current liabilties	5200
	Stockholder equity	29000
	Total Liabilities & stockholder equity	34200
	Cash flows from operating activities
	Collection from customers		$20,000
	Payment to accounts payable		-13000
	Payment of rent		-12000
	Net cash from operating activities		(5,000.00)
	Cash flows from investing activities
	Net cash used investing activities		-
	Cash flows from financing activities
	Cash dividend		-1000
	Issue of Common stock		28000
	Net cash from financing activities		27,000.00
	Net Increase in cash and cash equivalents		22,000.00
	Cash and cash equivalents at beginning of period		-
	Ending Balance		22,000.00
	Closing entry
Event	Accounst title	DR	cR
a)	Sales	$23,000
	Income summary		$23,000
	(being revenue closed to income summary)
b)	Income summary	$21,000
	Supplies expenses		$800
	Rent expenses		$3,000
	salaries expenses		1200
	General operating expenses		$16,000
	(being expenses closed to Income summary)
c)	Income summary	$2,000
	Retained Earnings		$2,000
	(being income summary closed to RE)
d)	Retained Earnings	$1,000
	Cash Dividend		$1,000
	(being dividend closed)