Question

Option #1: Accounting Cycle Part A Listed below are the transactions for Ajayi Art, Inc. for the month of July: July 1 Ajayi Art, Inc. is started with an investment of $250,000 cash. July 1 Ajayi purchases office equipment for $22,250 by signing a 10% note (interest and principal to be paid over the next 12 months). July 6 Pays rent for the art gallery in advance for the next three months with a check for $3,000. July 8 Purchases art supplies from Wacky Art Co. on credit for $10,300. July 9 Receipt of $3,500 from a customer who has commissioned a piece of custom art to be completed by the end of the year. July 11 Pays miscellaneous office expenses totaling $375 in cash. July 13 Bills customers $4,300 for art classes provided in June. July 15 Pays $3,500 to Wacky Art Co. July 20 Receives $1,900 from customers on account. July 30 Ajayi records $3,800 in salaries for the month of July. Paychecks will be disbursed to employees on August 2nd. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Office Equipment, Accumulated Depreciation, Accounts Payable, Common Stock, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Depreciation Expense, and Income Summary. Prepare an unadjusted trial balance. Record depreciation using a 5-year life on the office equipment, the straight-line method, and no salvage value. Round to whole numbers. Also, record an adjustment for art supplies used in the amount of $1,510 and record interest expense for the note. Prepare an adjusted trial balance. Prepare an income statement, a statement of retained earnings, and an unclassified balance sheet. Prepare closing entries. Part B In a one-page memo conforming to the CSU-Global Guide to Writing and APA, provide an explanation to the management team on July's financial performance. I need both Part A And Part B. Thanks in advance

Answer 1

	Ajayi Art Inc.
	Journal Entries
Date	Particular	Amt(DR)	Amt(CR)
01-Jul	Cash	$     2,50,000.00
	To Common Stock		$                                      2,50,000.00
	(Being Ajayai invested in a business)
01-Jul	Office Equipment	$         22,250.00
	To Note Payable		$                                          22,250.00
	(Being amount of Office equipment purchased by issuing 10% Note Payable)
06-Jul	Prepaid Rent	$           3,000.00
	To Cash		$                                            3,000.00
	(Being amount of three months rent paid in advance)
08-Jul	Art Supplies	$         10,300.00
	To Accounts Payable		$                                          10,300.00
	(Being amount of Art Supplies purchased from Wacky Art Co.)
09-Jul	Cash	$           3,500.00
	To Unearned Revenue		$                                            3,500.00
	(Being amount received in advance from customer)
11-Jul	Miscellaneous Office Expenses	$               375.00
	To Cash		$                                                375.00
	(Being amount paid for cash)
13-Jul	Accounts Receivable	$           4,300.00
	To Service Revenue		$                                            4,300.00
	(Being amount of billed to customer)
15-Jul	Accounts Payable	$           3,500.00
	To Cash		$                                            3,500.00
	(Being amount paid to Wacky Art Co.)
20-Jul	Cash	$           1,900.00
	To Accounts Receivable		$                                            1,900.00
	(Being amount of cash received from customers)
30-Jul	Salary	$           3,800.00
	To Salary Payable		$                                            3,800.00
	(Being amount of Salary due for the month of july)
31-Jul	Depreciation=($22250/5)/12	$               370.83
	To Accumulated Depreciation		$                                                370.83
	(Being amount of Depreciation)
31-Jul	Supplies Expenses	$           1,510.00
	To Art Supplies		$                                            1,510.00
	(Being amount of supplies used)
31-Jul	Rent	$           1,000.00
	to Prepaid Rent		$                                            1,000.00
	(Being amount of one month rent expired)
31-Jul	Interest =($22250*10%*1/12)	$               185.42
	To Interest Payable		$                                                185.42
	(Being amount of Interest due)
	Cash
Date	Particular	Amt (DR)	Amount (Cr)	Balance
01-Jul	Common Stock	$     2,50,000.00		$          2,50,000.00
06-Jul	Prepaid Rent		$                                            3,000.00	$          2,47,000.00
09-Jul	Unearned Service Revenue	$           3,500.00		$          2,50,500.00
11-Jul	Misc Office Expenses		$                                                375.00	$          2,50,125.00
15-Jul	Accounts Payable		$                                            3,500.00	$          2,46,625.00
20-Jul	Accounts Receivable	$           1,900.00		$          2,48,525.00
	Common Stock
Date	Particular	Amt (DR)	Amount (Cr)	Balance
01-Jul	Cash		$                                      2,50,000.00	$          2,50,000.00
	Prepaid Rent
Date	Particular	Amt (DR)	Amount (Cr)	Balance
06-Jul	Cash	$           3,000.00		$                3,000.00
31-Jul	Rent		$                                            1,000.00	2,000.00
	Rent
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Prepaid Rent	$           1,000.00		$                1,000.00
	Art Supplies
Date	Particular	Amt (DR)	Amount (Cr)	Balance
08-Jul	Accounts Payable	$         10,300.00		$             10,300.00
31-Jul	Art Supplies Expenses		$                                            1,510.00	8,790.00
	Supplies Expenses
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Art Supplies	$           1,510.00		$                1,510.00
	Note Payable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
01-Jul	Office Equipment		$                                          22,250.00	$             22,250.00
	Accounts Receivable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
13-Jul	Service Revenue	$           4,300.00		$                4,300.00
20-Jul	Cash		$                                            1,900.00	$                2,400.00
	Office Equipment
Date	Particular	Amt (DR)	Amount (Cr)	Balance
01-Jul	Note Payable	$         22,250.00		$             22,250.00
	Accounts Payable
Date	Particualr	Amt (DR)	Amount (Cr)	Balance
08-Jul	Art Supplies		$                                          10,300.00	$             10,300.00
15-Jul	Cash	$           3,500.00		$                6,800.00
	Unearned Revenue
Date	Particular	Amt (DR)	Amount (Cr)	Balance
09-Jul	Cash		$                                            3,500.00	$                3,500.00
	Salary
Date	Particular	Amt (DR)	Amount (Cr)	Balance
30-Jul	Salary Payable	$           3,800.00		$                3,800.00
	Salary Payable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
30-Jul	Salary	$           3,800.00		$                3,800.00
	Depreciation
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Accumulated Depreciation	$               370.83		$                   370.83
	Accumulated Depreciation
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Depreciation		$                                                370.83	$                   370.83
	Interest
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Interest Payable	$               185.42	$                                                         -	$                   185.42
	Interest Payable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Jul	Interest Payable		$                                                185.42	$                   185.42
	Service Revenue
Date	Particular	Amt (DR)	Amount (Cr)	Balance
13-Jul	Accounts Receivable		$                                            4,300.00	$                4,300.00
	Unearned Service Revenue
Date	Particular	Amt (DR)	Amount (Cr)	Balance
09-Jul	Cash		$                                            3,500.00	$                3,500.00
	Ajayi Art Inc.
	Trial Balance
	Account Title & Explaination	Amt (Dr)	Amt (Cr)
	Cash	$     2,48,525.00
	Accounts Receivable	$           2,400.00
	Prepaid Rent	$           2,000.00
	Office Equipment	$         22,250.00
	Art Supplies	$           8,790.00
	Accumulated Depreciation		$                                                370.83
	Accounts Payable		$                                            6,800.00
	Salary Payable		$                                            3,800.00
	Interest Payable		$                                                185.42
	Service Revenue		$                                            4,300.00
	Uneaned Revenue		$                                            3,500.00
	Common Stock		$                                      2,50,000.00
	Note Payable		$                                          22,250.00
	Salary Expenses	$           3,800.00
	Misc Office Expenses	$               375.00
	Depreciation Expenses	$               370.83
	Rent	$           1,000.00
	Interest Expenses	$               185.42
	Supples Expenses	$           1,510.00
	Total	$     2,91,206.25	$                                      2,91,206.25
	Ajayi Art Inc.
	Income Statement		-
	Service Revenue		$                                            4,300.00
	Expenses
	Salary Expenses	$           3,800.00
	Supplies Expenses	$           1,510.00
	Rent Expenses	$           1,000.00
	Interest Expenses	$               185.42
	Depreciation	$               370.83
	Misc.Office Expenses	$               375.00
	Total Expenses=(B)		$                                            7,241.25
	Net Income(A)-(B)		$                                           -2,941.25
	Ajayi Art Inc.
	Statement of Owner's Equity
	July 31st
	Beginning Retained Earnings	0
	Add: Net Income	$         (2,941.25)
	Ending Retained Earnings	$         (2,941.25)
	Ajayi Art Inc.
	Balance Sheet
	July 31st
	Assets
	Cash	$     2,48,525.00
	Accounts Receivable	$           2,400.00
	Art Supplies	$           8,790.00
	Prepaid Rent	$           2,000.00
	Office Equipment	$         22,250.00
	Accumulated Depreciation-Office Equipment	$             -370.83
	Total Assets		$                                      2,83,594.17
	Liabilities & Stockholder's equity
	Liabilities
	Accounts Payable	$           6,800.00
	Salary Payable	$           3,800.00
	Interest Payable	$               185.42
	Unearned Service Revenue	$           3,500.00
	Note Payable	$         22,250.00
	Total Liabilities		$                                          36,535.42
	Stockholder's Equity
	Common Stock	$     2,50,000.00
	Retained Earnings	$         (2,941.25)
	Total Equity		$                                      2,47,058.75
	Total Liabilities & Stockholder's Equity		$                                      2,83,594.17