Question

J. Jones opened a consulting business on January 2, 2019. He hired an old friend. His friend had the right to buy 25% of the company for $100,000. The following transactions occurred in January and February:

January:

2     Cash injection of $90,000 from Jones in cash. $40,000 is to be treated as a shareholder loan. The balance as a capital investment. The cash was deposited in the company bank account. Jones also gave a computer equipment worth $2,000, but wanted nothing in return for it.

3     Purchase of $570 of supplies for cash and $8,200 worth of furniture on account.

3     Signed a 3-year lease with monthly rates of $1,110. Paid rent for January.

4     Performed consulting services for Client 1 and received $2,500 in cash.

7     Paid $33,000 cash to acquire land for a future office site.

11   Consulted for Client #2 and sent an invoice to the client for $2,100.

12   Bought a used company car for $5,000. Salvage value estimated at $2,000 & useful life is 3 years.

15   Paid administrator a salary of $1975.

16 Paid for the furniture bought on account on January 3.

18   Received partial payment of $600 from client #2.

19   Provide major consulting to client #4, Invoiced for $11,350.

22   Paid utility bills totalling $300.

29   Received $2,700 payment for additional consulting provided to client #4.

31   Paid administrator a salary of $1975.

31   Jones withdrew $12,000 for personal use.

February month.

1     Purchased additional $250 in supplies.

1     Signed an insurance policy costing $3,600 over 3 years. Paid for February, March and April.

2     Client #4 paid half of its bill.

5     Bought supplies on account required for a client presentation. Supplies cost $250. Invoiced Client #5 a total of $1,400 for the presentation.

7     Paid administrator a salary of $1,875.

16 Received balance owing from client #2.

19   Received invoice for utility bills totalling $500.

28   Administrator was not working out.   Worked until end of February but, as yet, has not been paid.

28   Jones estimates the same amount of supplies were used for each month. The remaining balance of supplies when counted on February 28 was $200.

Status of J. Jones International:

The administrator was to do the books, but did nothing. Jones is not a happy camper. He has heard you are

an up and coming accounting whiz.

Your Assignment:

Your assignment is to prepare a ‘full accounting’ for each of January and February. Including in this work are journal entries, T-accounts, trial balances, adjusting entries, adjusted trial balances, financial statements and closing entries.

Notes:

1. Include a cover sheet and table of contents
2. After each journal entry, draw the ‘balance sheet diagram used in class’(as a T-account) and show the impacts on the balance sheet of the entries being posted.
3. Do not try to cram information. Use more sheets if possible.
4. If your package is not stapled, one mark will be deducted.

Opening Balances for February

Cash                                                                24,650

Accounts Receivable                                     11,950

Supplies (Asset)                                              400

Computers                                                      2,000

Accumulated Amortization - Computer          79

Vehicles                                                          5,000

Accumulated Amortization - Vehicles             111

Furniture                                                          2,800

Accumulated Amortization - Furniture            22

Land                                                                38,000

Accounts Payable                                           750

J. Jones, Capital                                             83,838

   I just want the February months transactions client is shown in the January transactions.

           

Answer 1

Journal Entries:

Date	Particulars	Debit	Credit
Feb 1	Supplies	250
	Cash		250
	(To record purchase of supplies)
Feb 1	Prepaid Insurance (3,600/3)*3/12	300
	Cash		300
	(To record insurance paid for 3 months)
Feb 2	Cash (11,350/2)	5,675
	Accounts Receivable		5,675
	(To record 50% payment received from client 4)
Feb 5	Supplies	250
	Accounts Receivable	1,400
	Cash		250
	Revenue		1,400
	(To record Supplies puchased and revenue on account)
Feb 7	Salary Expense	1,875
	Cash		1,875
	(To record administrator's salary paid)
Feb 16	Cash (2,100-600)	1,500
	Accounts Receivable		1,500
	(To record balance received from client 4)
Feb 19	Utility Expenses	500
	Utility Expenses Payable		500
	(To record utility expenses for the month)
Feb 28	Salary Expenses	1,875
	Salary Payable		1,875
	(To record salary to administrator due but not paid)
Feb 28	Supplies Expenses (400+250+250-200)	700
	Supplies		700
	(To record supplies expenses for the month of february)

Transactions for the month of february are recorded. Hope this clarifies your query. Incase of further assistance, kindly reach out to us.