Question

Scuttlebutt Publishers Corporation was incorporated on June 1, 2020. The company had the following transactions during June:

Part A

a. Issued common stock for $10,000 cash

b. Purchased equipment for $6,000 on credit

c. Purchased $750 of supplies on credit. These are expected to last three months (record as unused supplies)

d. Paid two months of newspaper advertising for $500 (record as prepaid advertising expense)

e. Collected $12,000 of three‐month subscription revenue for its ONLINE REVIEW magazine, effective June 1 (record as unearned subscription revenue)

f. Paid the following expenses in cash: telephone, $350; rent for

June, $500

g. Collected $5,000 revenue in cash from advertisers for the June edition of ONLINE REVIEW magazine

h. Paid half of the equipment purchased June 1

i. Paid $2,000 for supplies purchased

j. Paid the following expenses in cash: telephone, $250; salaries,

$3,000

k. Received a $200 bill for electricity used during the month

(recorded as Utilities Expense).

Required:

1. Create general ledger T‐accounts for the following: Cash, Prepaid Advertising, Unused Supplies, Equipment, Accounts Payable, Unearned Subscriptions Revenue, Common Stock, Other Revenue, Rent Expense, Salaries Expense, Supplies Expense, Telephone Expense, and Utilities Expense. General ledger account numbers are not needed. (These are created on the template already.)

2. Prepare journal entries to record the June transactions. Descriptions are not needed.

3. Post the entries to general ledger T‐accounts and calculate balances at June 30, 2020.

Part B

At June 30, the following additional information is available.

l. The June portion of advertising paid in transaction (c) has expired.

m. One month of the subscriptions revenue collected June 5 has been earned.

n. A physical count indicates that $100 of supplies is still on hand.

o. $200 of commission expense is owed on the June portion of the subscriptions revenue.

p. Two days of salary for June 29 and 30 are unpaid, amounting to $600.

q. The equipment purchased in transaction (b) has an estimated useful life of 5 years.

r. Income taxes payable at June 30 amount to $50.

Required:

4. Open additional general ledger T‐accounts for the following: Accumulated

Depreciation – Equipment, Salaries Payable, Income Taxes Payable,

Subscription Revenue, Advertising Expense, Commissions Expense,

Depreciation Expense – Equipment, and Income Taxes Expense. (These are already setup on the template.)

5. Prepare all necessary adjusting entries at June 30, 2020. General ledger account numbers and descriptions are not necessary, but show depreciation calculations.

6. Post the entries to the general ledger T‐accounts and calculate balances.

7. Prepare an adjusted trial balance at June 30.

8. Assume that the company’s year‐end is June 30. Prepare an income statement, statement of changes in equity, and balance sheet.

9. Prepare closing entries.

10. Prepare a post-closing trial balance.

Answer 1