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, 2017, 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.

Answer 1

Date General Journal Debit Credit April 01 Cash $80,000 Office equipment $26,000    Common stock $106,000 (issue of common stock) April 02 Prepaid rent $9,000 Cash $9,000 Paid prepaid rent for 12 months April 03 Office equipment $8,000 Office supplies $3,600 Accounts payable $11,600 (purchase of office equipment and supplies) April 06 Cash $4,000 Services revenue $4,000 (Cash received for services provided) April 09 Accounts receivable $6,000 Services revenue $6,000 (service provided on account) April 13 Accounts payable $11,600 Cash $11,600 Paid accounts payable April 19 Prepaid insurance $2,400 Cash $2,400 Paid prepaid insurance April 22 Cash $4,400 Accounts receivable $4,400 Cash received for service provided earlier April 25 Accounts receivable $2,890 Services revenue $2,890 Service provided on account April 28 Dividends $5,500 Cash $5,500 Paid cash dividend April 29 Office supplies $600 Accounts payable $600 Office supplies purchased on account April 30 Utilities expense 435 Cash 435

Adjusting entries

Date	General Journal	Debit	Credit
April 30	Office rent	$750
	Prepaid rent		$750
	(one month rent expired) $9000/12
	Insurance expenses	$200
	Prepaid insurance		$200
	(one month insurance expired) $2400/12
	Office supplies expenses	$3000
	Office supplies (4200-1200)		$3000
	(office supplies consumed)
	Depreciation equipment	$500
	Accumulated depreciation - equipment		$500
	(depreciation on equipment)
	Accounts receivable	$1800
	Service revenue		$1800
	(Service income earned but not billed)
	Wages	$2600
	Wages payable		$2600
	(Wages payable to employees)