Question

Karla Tanner opened a web consulting business called Linkworks and recorded the following transactions in its first month of operations.

Apr.		1		Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock.
Apr.		2		The company prepaid $9,000 cash for twelve months’ rent for office space. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		3		The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days.
Apr.		6		The company completed services for a client and immediately received $4,000 cash.
Apr.		9		The company completed a $6,000 project for a client, who must pay within 30 days.
Apr.		13		The company paid $11,600 cash to settle the account payable created on April 3.
Apr.		19		The company paid $2,400 cash for the premium on a 12-month insurance policy. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		22		The company received $4,400 cash as partial payment for the work completed on April 9.
Apr.		25		The company completed work for another client for $2,890 on credit.
Apr.		28		The company paid $5,500 cash in dividends.
Apr.		29		The company purchased $600 of additional office supplies on credit.
Apr.		30		The company paid $435 cash for this month’s utility bill.

Descriptions of items that require adjusting entries on April 30, follow.

• a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space.

• b) The balance in Prepaid insurance represents the premium paid for a 12-month insurance policy the policy's coverage began on April 1.

• c) Office supplies on hand as of April 30 total $1,200.

• d) Straight-line depreciation of office equipment, based on a 5-year life and a $4,000 salvage value, is $500 per month.

• e) The company has completed work for a client, but has not yet billed the $1,800 fee.

• f) Wages due to employees, but not yet paid, as of April 30 total $2,600.

REQUIRED:

Make a General Journal and General Ledger using the information provided for the question.

(I.E- first question on journal entry: On April 2, the company prepaid $9,000 cash for twelve months' rent for office space. Prepare the required adjusting entry, if any.)

Answer 1

	Date	Particulars	Debit	Credit
	01-Apr	Cash	$80,000
		Equipment	$26,000
		To Owner's Equity		$106,000
a.	02-Apr	Prepaid Rent	$9,000
		To Cash		$9,000
	03-Apr	Accounts Payable	$11,600
		To Office Equipment		$8,000
		To Office Supplies		$3,600
	06-Apr	Cash	$4,000
		To Sales		$4,000
	09-Apr	Accounts Receivable	$6,000
		To Sales		$6,000
	13-Apr	Accounts Payable	$11,600
		To Cash		$11,600
	19-Apr	Prepaid Insurance	$2,400
		To Cash		$2,400
	22-Apr	Cash	$4,400
		To Accounts Receivable		$4,400
	25-Apr	Accounts Receivable	$2,890
		To sales		$2,890
	28-Apr	Dividends Payable	$5,500
		To Cash		$5,500
	29-Apr	Office Supplies	$600
		To Accounts Payable		$600
	30-Apr	Utilities Expense	$435
		To Cash		$435
b	Apr-30	Insurance Premium	$200
		To Prepaid Insurance		$200
c.	Apr-30	Office Supplies Expense	$3,000
		To Office Supplies		$3,000
d.	Apr-30	Depreciation Expense	$500
		To Accumulated Depreciation		$500
e.	Apr-30	Accounts Receivable	$1,800
		To sales		$1,800
f.	Apr-30	Wages Payable	$2,600
		To Salaries		$2,600
	30-Apr	Rent Expense	$750
		To Prepaid Rent		$750

Income Statement
Revenues:
	Sales Revenue			$14690
Expenses:
	Utilities Expense		$435
	Insurance Premium		$200
	Office Supplies Expense		$3000
	Depreciation Expense		$500
	Rent Expense		$750
	Office Equipment Expense		$8000	$12885
Net Profit:				$1805

Note : English alphabet mentioned in left column as adjusting entry