Question

XYZ Company began operations in May, 2018 by selling common stock to
owners in exchange for $90,000 cash. During 2018, ABC Company entered
into the following transactions:

1.  On May 23, ABC Company purchased inventory for $50,000 cash.

2.  On June 1, ABC Company purchased a three-year insurance policy
    for $23,400 cash.

3.  On July 1, ABC Company received $49,500 cash from a customer
    for services to be performed over the next 18 months.

4.  On August 1, ABC Company purchased equipment for $60,000 cash.
    The equipment was assigned a 10-year life and a $2,400 residual
    value.

5.  On August 18, ABC Company sold one-half of the inventory that
    was purchased on May 23 to a customer for $44,000 cash.

Calculate the amount of total assets that ABC Company would report in
its December 31, 2018 balance sheet after all the above transactions
are recorded and all necessary adjusting entries are made and posted. 

Answer 1

Solution : All amounts in $

	Total Assets :
1	Closing Inventory valued at cost	(50% of 50000)	25,000
2	Prepaid Insurance	for balance 29 months	18,850
3	Equipment		57,600
4	Cash Balance		50,100
5	Deferred Revenue Income		(33,000)
			118,550
	Journal Entries
Date	Particulars	Dr	Cr
1-May	Cash A/c	90,000
	To Share Capital		90,000
23-May	Purchases A/c	50,000
	To Cash A/c		50,000
1-Jun	Prepaid Insurance	23,400
	To Cash A/c		23,400
	(purchased for 36 months)
1-Jul	Cash A/c	49,500
	To Deferred Revenue		49,500
1-Aug	Equipment A/c	60,000
	To cash A/c		60,000
18-Aug	Cash A/c	44,000
	To Sales A/c		44,000
31-Dec	Closing Inventory A/c	25,000
	To Closing Stock A/c		25,000
31-Dec	Insurance A/c	4,550
	To prepaid insurance		4,550
	( expensed for 7 months )
31-Dec	Depreciation A/c	2,400
	TO Acc Dep on Equipment		2,400
	( Depr = (60000-2400)/120*5 months)
31-Dec	Deferred Revenue A/c	16,500
	Revenue A/c		16,500
	( proportionate income for 6 months out of 18)