Question

Emily Corp

Beginning

Balances

1-Feb-09

Debit

Credit

Cash

10300

Accounts Receivable

6000

Allowance for doubtful accounts

60

Office Supplies

250

Inventory

1000

Prepaid Insurance

2000

Accounts Payable

3000

Interest Payable

50

Note Payable

10000

Stock

1000

Retained Earnings

5440

19550

19550

The beginning inventory consists of 100 units @ $10 each

The company uses the FIFO perpetual inventory assumption

The transactions for the month were:

Purchase a computer for the company (paid cash) $2700

Paid salary of $1200

Paid cash for utility expense $200

Paid cash for rent expense $1500

Received cash from customer for work done previously (accounts receivable) $5,000

Paid accounts payable amounts $3000

Purchased office supplies on account $200

Purchased inventory on account 300 units $3300

Cash sales were 250 units, $5000

Purchased inventory for cash 350 units $4200

Credit sales were 400 units $8000

Required:

Record the transaction (journal entries)

Post the transactions to the ledger (T accounts)

Prepare trial balance

Record adjusting journal entries for February 28:

The prepaid insurance was paid October 1st for 6 months

Supplies on hand at the end of the month are $225

The note payable was signed December 31st. It bears an interest rate of 6%. The note is due in 18 months.

Record depreciation, the computer has an estimated life of 3 years and no salvage value.

The company uses straight line method of depreciation

Assume the computer was purchased on the first day of the month

The company estimates that 1% of accounts receivable will not be collectable

Post the adjusting entries to the ledger (T accounts)

Prepare an adjusted trial balance

Prepare the February 28 financial statements:

Multi Step Income

Statement

Statement of retained earnings

Classified Balance Sheet

Answer 1

JE without spacing due to keep the answer within allowed 65000 characters.

a) Journal entries:
date	Accounts title	Debit $	Credit $
	Equipment	2700
	Cash		2700
	(computer purchased)
	Salary exp.'	1200
	Cash		1200
	(being salaries paid)
	Utility exp.	200
	Cash		200
	(being utility exp. Made)
	Rent exp.	1500
	Cash		1500
	(being rent paid)
	Cash	5000
	Acc. Receivable		5000
	(being cash received from AR)
	Acc. Payable	3000
	Cash		3000
	(being cash paid to AP)
	Supplies	200
	Cash		200
	(being supplies purchased)
	Inventory	3300
	Acc. Payable		3300
	(inventory purchased on account)
	Cash	5000
	Sales		5000
	(sales booked in cash)
	COGS (100*10+150*11)	2650
	Inventory		2650
	(being COGS for sales booked)
	Inventory	4200
	cash		4200
	(inventory purchased on account)
	Acc. Receivable	8000
	Sales		8000
	(being sales made on credit)
	COGS (150*11+250*12)	4650
	Inventory		4650
	(being COGS for sales booked)
c) Journal entries of adjusting entries:
28-Feb	insu. Exp'	1000
	Prepaid ins.		1000
	(being insurance exp. Booked)
28-Feb
	Supplies exp.	225
	Off. Supplies		225
28-Feb	(being supplies exp. Booked)
	Interest exp.	50
	Interest payable		50
	(being interest payable made due)
	(10000*6%*3/12)
28-Feb	Dep. Exp.	75
	Acc. Dep. - equipment		75
	(being one mth depreciation on computer booked)
28-Feb	Bad Debt exp.	30
	Allow. For doubtful a/cs		30
	(being allow for doubtful acc. Maintained at 1%)

b) T-accounts:
DEBIT	AMOUNT$	CREDIT	AMOUNT$
Cash a/c
OB	10300	equip	2700
AR	5000	salary	1200
SALES	5000	Utility	200
		rent	1500
		AP	3000
		SUPPLIES	200
		Inventory	4200
		CB	7300
AR a/c
OB	6000	CASH	5000
sales	8000	CB	9000
Allow for doubtful a/cs
CB	90	OB	60
		Bad Debt	30
Office Supplies a/c
OB	250	Supp exp	225
cash	200	CB	225
Inventory a/c
OB	1000	COGS	2650
AP	3300	COGS	4650
cash	4200	CB	1200
Prepaid Insu a/c
OB	2000	Ins exp	1000
		CB	1000
AP a/c
cash	3000	OB	3000
CB	3300	inventory	3300
Interest payable a/c
CB	100	OB	50
		int exp	50
NP a/c
		OB	10000
Capital Stock
		OB	1000
RE a/c
		OB	5440
equip a/c
cash	2700
salary exp a/c
cash	1200
utility exp a/c
cash	200
rent exp a/c
cash	1500
Sales a/c
CB	13000	cash	5000
		AR	8000
COGS a/c
Inv.	2650	CB	7300
Inv.	4650
Supplies exp a/c
supp	225
Interest exp. a/c
Int. payable	50
Dep. Exp. a/c
Acc. Dep.	75
Bad Debt a/c
Allow. For doubtful a/c	30
Acc. Dep.- Equipment a/c
		Dep exp	75
Insurance exp. a/c
Prep ins	1000

c) Adjusted Trial Balance:
Accounts title	Debit $	Credit $
Cash	7300
AR	9000
Allow for doubtful a/c		90
Off. Supplies	225
Inventory	1200
Prepaid ins.	1000
AP		3300
Int.payable		100
NP		10000
C Stock		1000
RE		5440
Equipment	2700
Salary exp	1200
Utility exp	200
Rent exp	1500
Sales		13000
COGS	7300
Sup exp	225
int exp	50
dep exp	75
Bad Debt exp.	30
Acc. Dep.-equip		75
Ins. Exp.	1000
Total	33005	33005
d) Income Statement:
Sales	13000
less: COGS	7300
Gross Profit	5700
Less:Expenses:
Salary exp	1200
Utility exp	200
Rent exp	1500
Sup exp	225
int exp	50
dep exp	75
Bad Debt exp.	30
Ins. Exp.	1000
Total exp.	4280
Net Income	1420
e) Statement of RE:
Opening bal.	5440
Add:Net Income	1420
Closing balance	6860
f) Balance Sheet:
Assets:	AMOUNT$
Cash	7300
AR	9000
Allow for doubtful a/c	-90
Off. Supplies	225
Inventory	1200
Prepaid ins.	1000
Current Assets	18635
Equipment	2700
Acc.Dep.-Equip	-75
Total Assets	21260
Liabilities and SH Eq.:	AMOUNT$
AP	3300
Int.payable	100
Current liabilities	3400
NP	10000
SH. Equity:
C Stock	1000
RE	6860
Total Liabilities & SH Eq.	21260