Question

SRP Ltd has the following unadjusted trial balance as at 31 Dec 2015. Account Titles Debit ($) Credit ($) Cash 19,600 Accounts Receivable 7,000 Supplies 1,300 Prepaid Insurance 900 Equipment 27,000 Accumulated Depreciation 12,000 Other Assets 5,100 Accounts Payable 7,500 Share Capital (3000 shares outstanding all year) 16,000 Retained Profit 10,300 Service Revenue 48,000 COGS 32,900 Total 93,800 93,800 Note: Data not yet recorded as at 31 Dec 2015 includes the following five (5) transactions: 1) Depreciation expense for 2015 was $3,000. 2) Insurance expired during 2015 was $450. 3) Wages earned by employees but not yet paid on 31 December 2015 was $2,100. 4) The supplies count on 31 December 2015 reflected $800 remaining supplies on hand to be used in 2016. 5) Income tax expense was $3,150. Required: 1) Record the 2015 adjusting entries. 2) Prepare an income statement and a classified balance sheet for 2015 to include the effect of the five (5) transactions listed above. 3) Prepare closing entries.

Answer 1

Answer :

(a).

Date	Account Title	Debit	Credit
1.	Depreciation expense	3000	-
	Accumulated derpecition	-	3000
2	Insurance expense	450	-
	Prepaid insurance	-	450
3	Wages expense	2100	-
	Wafe payable	-	2100
4	supplies expense	500	-
	Supplies	-	500
	(Being supplies used 1300 unadjusted balance 800 at end = 500)	-	-
5	Income tax expense	3150	-
	Income tax payable	-	3150

(b).

SRP Ltd

Income Statement

For the year ended December 31.2015

Service Revenue	-	48000
COGS	-	32900
Gross profit	-	15100
Less : Operating expense	-	-
Depreciation expense	3000	-
Insurance expense	450	-
Wage expense	2100	-
Supplies expense	500	-
Total operating expense	-	(6050)
Income before income tax expense	-	9050
Income tax expense	-	(3150)
Net Income	-	5900

SRP Ltd

BALANCE SHEET

AS AT DECEMBER 31.2015

Assets	-	-
Cash	19600	-
Account receivable	7000	-
Supplies	800	-
Prepaid insurance (900 - 450)	450	-
Total Current asset	-	27850
Non Current asset	-	-
Equipment	27000	-
Accumulated depreciation (12000 + 3000)	(15000)	12000
Other asset	-	5100
Total asset	-	44950
Liabilities and stockholders equity	-	-
Accounts payable	7500	-
Wages payable	2100	-
Income tax payable	3150	-
Total current liabilities	-	12750
Stockholders equity	-	-
Share capital	16000	-
Retained earnings (10300 + 5900)	16200	-
Total equity	-	32200
Total liability and stockholders equity	-	44950

(3).

Date	Account Title	Debit	Credit
a	Service Revenue	48000	-
	Income summary	-	48000
	[To Close Revenue]	-	-
b	Income summary	42100	-
	COGS	-	32900
	Depreciation expense	-	3000
	Insurance expense	-	450
	Wage expense	-	2100
	Supplies expense	-	500
	Income tax expense	-	3150
	{To Close expense]	-	-
c	Income summary	5900	-
	Retained earnings	-	5900
	[To Close net income]	-	-