Question

Accounting 1A

Huntington Beach Surf Consulting, Inc. (“HBSCI”) is the company you started on December 1, 2019. The following transactions occurred during the month ended December 31, 2019:

1. The business was started with a $25,000 cash investment from your personal account on December 1, 2019.

2. A 5-year lease agreement was signed on December 2 that required December 2019 rent of $5,000 to be paid along with last month’s rent of $5,000. The payment was made on December 2nd.

3. Supplies were purchased on account on December 5th for a total of $2,000.

4. Services were performed on December 10th for $20,000 in cash.

5. Payment was made on December 15th for the supplies purchased on account.

6. On December 18th, a 1970 VW surf van with a market value of $12,000 was purchased for $2,000 in cash and a note for $10,000. Corky Carroll, a retired surf champion, and owner of Corky Carroll’s Surf School in Huntington Beach made you a cash offer of $20,000 for the VW surf van the same day.

7. You received a cash deposit of $6,000 from Mr. Grom on December 20th for surfing lessons to be performed at a later date.

8. A cash dividend of $5,000 was paid on December 31, 2019.

Journalize the above transactions in proper journal entry form (excluding explanations) (12 Points)

You assembled the following data on January 5, 2020 possibly related to the month December 2019:    

1. Surf lessons performed but unbilled during the December were $12,000.

2. Accounting and legal fees for December were $2,000 per invoices dated January 5, 2020.

3. Depreciation related to the VW surf van for the month of December was $200.

4. No salaries were paid in December, but the surf coach is owed $3,000.

5. Supplies existing at December 31, 2019 totaled $800.

6. Grom took two surfing lessons in December totaling $1,000.

7. You anticipate surfing fees of $7,500 in January 2020.

Journalize the above adjustments in proper journal entry form (excluding explanations). If no entry is required state “No Entry”. (11 Points)

Determine account balances using T-Accounts (2 points)

Prepare the three basic financial statements in proper format (15 points)

Prepare the closing entries for December 31, 2019 in proper journal entry form (5 points)

Prepare a post-closing trial balance at December 31, 2019 (5 points)

Answer 1

Journal entries for the given transactions

Journal
Date	Details	Dr $	Cr $
2019 Dec 1	Dr Cash	25000
	Cr Capital		25000
2	Dr Rent	10000
	Cr Cash		10000
5	Dr Purchase	2000
	Cr Accounts payables		2000
10	Dr Cash	20000
	Cr Service revenue		20000
15	Dr Accounts payables	2000
	Cr Cash		2000
18	Dr VW surf van	12000
	Cr cash		2000
	Cr Accounts payable		10000
20	Dr Cash	6000
	Cr Accounts payable -M Grom		6000
31	Dr Dividend	5000
	Cr Cash		5000
18	Offer of $20000 from 'corky 'corroll's for Van	no entry required

Adjustment Entries
Journal
Date	Details	Dr $	Cr $
1	Dr Accounts receivables	12000
	Cr Service revenue		12000
2	Dr legal fees	2000
	Cr Tax authorities		2000
3	Dr Income statement	200
	Cr Depreciation		200
4	Dr Salaries	3000
	Cr salary accrued		3000
5	Dr Purchase	800
	Cr Trade payables		800
6	Dr Surifng fee	1000
	Cr Income statement		1000
6	No entry is required for anticipation of surfing fees

cash account
Date	Details	Amount	Date	Details	Amount
2019, Dec 1	capital	25000	2019, Dec 2	rent	10000
10	revenue	20000	15	accounts payable	2000
20	Accounts payable Grom	6000	18	Surfing Van	2000
			31	Dividend	5000
			31	Balance c/d	32000
		51000			51000
2020, Jan 1	Balance b/d	32000