Question

Prepare trial balance. Unadjusted/adjusting/adjusted trial balances.

The following transactions occurred during the first twelve months of operations:
January 1st	Common stock is issued in exchange for cash in the amount of ………….………….………………………								295,000
February 8th	The company purchases and pays for 160 units of gourmet dog food at a price of $25 per unit …………..								4,000
March 1st	The company pays cash for a one-year insurance policy in the amount of ……………….………………………..…..								9,300
March 31st	Rent on a retail space for 12 months is paid in the amount of …..……….………………………………………								12,480
April 1st	Grooming and boarding equipment with a useful life of 2 years is purchased for cash in the amount of ……								18,000
April 10th	Grooming supplies purchased on account in the amount of …………..……………………………………………								1,450
May 15th	The company purchases and pays for another 370 units of gourmet dog food at a price of $29 per unit …..								10,730
May 30th	Grooming services are performed on account in the amount of …………………………………………………………..…………								13,625
June 1st	The company pays for advertisements to be run for the next 12 months in the amount of ……………………….								864
June 30th	The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 6%.
	Interest is due on June 30th each year. The market rate is 8% on the date of issuance …………………………….								100,000
July 25th	Dog-walking services are performed on account in the amount of …...……………………………..…………								14,225
July 31st	95 units of gourmet dog food are sold for $70 per unit with terms 2/10, n/30. The sale is recorded using
	the gross method in the amount of (see note c for cost flow assumptions) …………………………………………………………………………………….								6,650
August 2nd	Boarding services are provided on account in the amount of ……………………………………………………………….								6,280
August 6th	The company receives full payment from the customer for the July 31st sale ………………………………………								6,517
September 15th	Pet sitting services are performed on account in the amount of ……………………..…………………………….…………..								6,245
September 29th	Customer payments are received for services previously provided in the amount of ………………………………..								1,250
October 13th	100 units of gourmet dog food are sold for $73 per unit with terms 2/10, n/30. The sale is recorded using
	the gross method in the amount of ……………………………………………………………………………………….								7,300
October 29th	The company receives payment for half of the October 13th sale ………………………………………………………								3,650
November 1st	Equipment originally purchased on April 1st for $2400 is sold for $2000 cash
November 15th	A bookkeeper is hired to help the company with daily accounting taxes and annual tax preparation
December 15th	The bookkeeper is paid $3,500 for the previous month's services								3,500

Additional information:
Grooming supplies on hand at the end of the month are as follows: …………………………………….								870
The year-end balance reported at the end of the year for the Allowance for Doubtful Accounts
is estimated as 4% of outstanding receivables at the end of the year
The Company uses a perpetual inventory system and accounts for costs using the First-In-First-Out cost
flow assumption. On December 31st, a count of ending inventory reveals that there are 335 bags of dog
food on hand.
All revenue is recorded in the "Sales Revenue" account and reported net of cash discounts on the income statement.
The effective interest method is used to amortize bond premiums and discounts
Adjustments are made at the end of the year for prepaid insurance, rent, advertising, depreciation, and interest expense.
The bookkeeper is paid a salary of $3,500 on the 15th of every month.
The company declared dividends of $650 for the year
Assume selling expenses include advertising and supplies expense. All other expenses, other than depreciation
and interest expense, are considered general & administrative.

Answer 1

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Date	Account	Debit	Credit
Jan 1	Cash	$295,000
Jan 1	Common Stock		$295,000
Feb 8	Inventory	$    4,000
Feb 8	Cash		$    4,000
Mar 1	Prepaid Insurance	$    9,300
Mar 1	Cash		$    9,300
Mar 31	Prepaid Rent	$ 12,480
Mar 31	Cash		$ 12,480
Apr 1	Equipment	$ 18,000
Apr 1	Cash		$ 18,000
Apr 10	Supplies	$    1,450
Apr 10	Accounts Payable		$    1,450
May 15	Inventory	$ 10,730
May 15	Cash		$ 10,730
May 30	Accounts Receivable	$ 13,625
May 30	Service Revenue		$ 13,625
Jun 1	Prepaid Advertising	$        864
Jun 1	Cash		$        864
Jun 30	Cash	$ 92,016
Jun 30	Discounts on Bond Payable	$    7,984
Jun 30	Bond Payable		$100,000
		PVf/Pvaf	Amount	PV
	Present Value of 100000 (n 5, i 8%)	0.6806	$100,000	$ 68,060
	Present Value of Interest 100000*6%	3.9927	$    6,000	$ 23,956
	Bond Issure Price			$ 92,016
Jul 25	Accounts Receivable	$ 14,225
Jul 25	Service Revenue		$ 14,225
Jul 31	Accounts Receivable	$    6,650		95*70
Jul 31	Sale Revenue		$    6,650
Jul 31	Cost of Goods Sold	$    2,375
Jul 31	Inventory		$    2,375
Aug 2	Accounts Receivable	$    6,280
Aug 2	Service Revenue		$    6,280
Aug 6	Cash	$    6,517
Aug 6	Sales Discount	$        133		6650*2%
Aug 6	Accounts Receivable		$    6,650
Sep 15	Accounts Receivable	$    6,245
Sep 15	Service Revenue		$    6,245
Sep 29	Cash	$    1,250
Sep 29	Accounts Receivable		$    1,250
Oct 13	Accounts Receivable	$    7,300		100*73
Oct 13	Sale Revenue		$    7,300
Oct 13	Cost of Goods Sold	$    2,640
Oct 13	Inventory		$    2,640
Oct 29	Cash	$    3,650
Oct 29	Accounts Receivable		$    3,650
Nov 1	Depreciation Expense	$        700		2400/2*7/12
Nov 1	Accumulated Depreciation		$        700
Nov 1	Cash	$    2,000
Nov 1	Accumulated Depreciation	$        700
Nov 1	Gain on Sale of Equipment		$        300
Nov 1	Equipment		$    2,400
Dec 15	Salaries Expense	$    3,500
Dec 15	Cash		$    3,500
Adjusting:
1	Supplies Expense	$        580		1450-870
1	Supplies		$        580
2	Bad Debt Expense	$    1,711
2	Allowance for Doubtful Accounts		$    1,711
	Sale/Service	$ 54,325
	Less: Collection	$ 11,550
	Unadjusted Balance	$ 42,775
	Bad Debt 4%	$    1,711
4	Interest Expense	$    6,000
4	Discount on Bond Payable		$        480
4	Interest Payable		$    5,520
5	Insurance Expense	$    7,750		9300/12*10
5	Prepaid Insurance		$    7,750
6	Rent Expense	$    9,360		12480/12*9
6	Prepaid Rent		$    9,360
7	Advertising Expense	$        504		864/12*7
7	Prepaid Advertising		$        504
8	Depreciation Expense	$    1,950		(18000-2400)/2*3/12
8	Accumulated Depreciation		$    1,950
9	Salaries Expense	$    3,500
9	Salaries Payable		$    3,500
10	Dividends	$        650
10	Dividend Payable		$        650

	Normal		Adjustments		Adjusted
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$ 341,559				$341,559
Accounts Receivable	$    42,775				$ 42,775
Allowance for Doubtful Accounts				$    1,711		$    1,711
Inventory	$      9,715				$    9,715
Prepaid Advertising	$         864			$       504	$        360
Prepaid Insurance	$      9,300			$    7,750	$    1,550
Prepaid Rent	$    12,480			$    9,360	$    3,120
Supplies	$      1,450			$       580	$        870
Equipment	$    15,600				$ 15,600
Accumulated Depreciation	$            -			$    1,950		$    1,950
Accounts Payable		$    1,450				$    1,450
Interest Payable				$    5,520		$    5,520
Salaries Payable				$    3,500		$    3,500
Dividend Payable				$       650		$       650
Bond Payable		$100,000				$100,000
Discounts on Bond Payable	$      7,984			$       480	$    7,504
Dividends			$       650		$        650
Common Stock		$295,000				$295,000
Sale Revenue		$ 13,950				$ 13,950
Sales Discount	$         133				$        133
Service Revenue		$ 40,375				$ 40,375
Gain on Sale of Equipment		$       300				$       300
Cost of Goods Sold	$      5,015				$    5,015
Depreciation Expense	$         700		$    1,950		$    2,650
Salaries Expense	$      3,500		$    3,500		$    7,000
Supplies Expense			$       580		$        580
Bad Debt Expense			$    1,711		$    1,711
Interest Expense			$    6,000		$    6,000
Rent Expense			$    9,360		$    9,360
Insurance Expense			$    7,750		$    7,750
Advertising Expense			$       504		$        504
Total	$ 451,075	$451,075	$ 32,005	$ 32,005	$464,406	$464,406