Question

During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation,
completed the following transactions.
July 1	Began business by making a deposit in a company bank account of $40,000, in exchange
	for 4,000 shares of $10 par value common stock.
July 3	Paid the current month's rent, $2,500
July 5	Paid the premium on a 1-year insurance policy, $3,600
July 7	Purchased supplies on account from Little Company, $700.
July 10	Paid employee salaries, $2,800
July 14	Purchased equipment from Lake Company, $9,500. Paid $1,500 down and the balance was
	placed on account. Payments will be $500.00 per month for 20 months. The first payment is due 8/1.
	Note: Use accounts payable for the balance due.
July 15	Received cash for preparing tax returns for the first half of July, $6,500
July 19	Made payment on account to Lake Company, $500.
July 31	Received cash for preparing tax returns for the last half of July, $8,250
July 31	Declared and paid cash dividends of $450.									Prepare the financial statements for the Quick Tax Corporation as of July 31 in the space below. You will only be preparing the income statement, statement of retained earnings, and the balance sheet. The statement of cash flows is a required financial statement, but is not required for this case study. Quick Tax Corporation Quick Tax Corporation Quick Tax Corporation Income Statement Statement of Retained Earnings Balance Sheet For the Month Ending July 31 For the Month Ending July 31 July 31 Revenues: Retained Earnings, July 1 Assets: Revenue Add: Net Income Cash Subtotal Supplies Expenses: Less: Dividends Prepaid Insurance Rent Expense Retained Earnings, July 31 Equipment Salaries Expense Less: Accum. Depr. Insurance Expense Total Assets Supplies Expense Depreciation Expense Liabilities: Income Tax Expense Accounts Payable    Total Expenses Income Tax Payable Total Liabilities Net Income Stockholders' Equity: Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and    Stockholders' Equity Prepare the closing entries at July 31 in the General Journal below. General Journal Date Description (Account Name) Debit Credit Requirement #9: Post the closing entries to the General Ledger T-accounts and compute ending balances. Just add to the adjusted balances already listed. Prepare a post-closing trial balance as of July 31 in the space below. Quick Tax Corporation Post-Closing Trial Balance July 31 0 0

Answer 1

Journal entries for the above transactions
	General Journal	Debit	Credit
1	Bank	$40,000
	Common stock		$40,000
	(To record common stock sold in exchange of cash deposited in Bank account)
2	Rent	$2,500
	Cash		$2,500
	(Paid current months' rent)
3	Prepaid Insurance	$3,600
	Cash		$3,600
	(To record cash paid 1 year insurance policy)
4	Supplies	$700
	Accounts payable		$700
	(To record purchase of supplies on account)
5	Salaries	$2,800
	Cash		$2,800
	(To record salaries)
6	Equipment	$9,500
	Cash		$1,500
	Accounts payable		$8,000
7	Cash	$6,500
	Service Revenue		$6,500
	(To record cash received for preparing tax returns)
8	Accounts payable	$500
	Cash		$500
	(To record payment made to Lake Company for supplies)
9	Cash	$8,250
	Service Revenue		$8,250
	(To record cash received for preparing tax returns)
10	Dividend paid	$450
	Cash		$450
	(To record dividend declared and paid)
	Trial Balance for Quick Tax Corporation as of July 31
	Particulars	Debit	Credit
	Cash & bank	$43,400
	Common Stock		$40,000
	Accounts payable		$8,200
	Equipment	$9,500
	Supplies	$700
	Prepaid Insurance	$3,300
	Accumulated Depreciation		$79
	Dividend paid	$450
	Service Revenue		$14,750
	Rent	$2,500
	Insurance Expenses	$300
	Salaries	$2,800
	Depreciation	$79
	Total	$63,029	$63,029
	Income Statement
	For the month ending July 31
	Revenues:
	Revenue	$14,750
	Expenses:
	Rent	$2,500
	Salaries	$2,800
	Insurance	$300
	Supplies	$700
	Depreciation	$79
	Income tax expenses @ 35%	$2,930
	Total expenses	$9,309
	Net Income	$5,441
	Statement of Retained Earnings
	Retained Earnings, July 1	0
	Add: Net Income	$5,441
	Subtotal	$5,441
	Less: Dividend Paid	$450
	Retained Earnings, July 31	$4,991
	Balance Sheet
	31-Jul
	Assets:
	Cash	$43,400
	Supplies	0
	Prepaid Insurance	$3,300
	Equipment	$9,500
	Less: Accumulated Depreciation	($79)
	Total Assets	$56,121
	Liabilities:
	Accounts payable	$8,200
	Income tax payable	$2,930
	Total Liabilties	$11,130
	Stockholder's Equity
	Common Stock	$40,000
	Retained Earnings	$4,991
	Total Stockholder's Equity	$44,991
	Total Liabilities & Stockholders Equity	$56,121
	Closing Entries
	Sercive Revenue	$14,750
	Income Summary		$14,750
	Income Summary	$9,309
	Rent		$2,500
	Salaries		$2,800
	Insurance		$300
	Supplies		$700
	Depreciation		$79
	Income tax expenses @ 35%		$2,930
	Retained Earnings	$5,441
	Income Summary		$5,441
	Adjusted Trial Balance for Quick Tax Corporation as of July 31
	Particulars	Debit	Credit
	Cash & bank	$43,400
	Common Stock		$40,000
	Retained Earnings		$4,991
	Accounts payable		$8,200
	Income Tax payable		$2,930
	Equipment	$9,500
	Prepaid Insurance	$3,300
	Accumulated Depreciation		$79
	Total	$56,200	$56,200
It is assumed all the supplies consumed in the current month
It is assumed that equipment is depreciated on straight line basis for 10 years with no salvage value
	$9500/10 years x 1/12 = $79