Question

Powerjob Inc. provides employment consulting services. The company adjusts its accounts monthly but performs closing entries annually on December 31. The firms’s unadjusted trial balance dated December 31, 2019 is shown below. Other data: 1.       Accrued but unrecorded and uncollected consulting fees earned at December 31 total : $25000. 2.       The company determined that $15000 of previously unearned consulting fees had been earned at December 31. 3.       Office supplies on hand at December 31 total $300 4.       The company purchased all of its equipment when it first began business. At that time, the estimated useful life of the equipment was six years. 5.       The company prepaid its nine-month rent agreement on June 1, 2019. 6.       The company prepaid its six-month insurance policy on December 1, 2019 7.       Accrued but unpaid salaries total $12000 at December 31,2019. 8.       On September 1, 2019, the company borrowed $60000 by signing an eight-month, 4 percent note payable. The entire amount, plus interest, is due March 31, 2020. PowerJob Inc. UNADJUSTED TRIAL BALANCE DECEMBER 31, 2019 Account Debit Credit Cash $276.500 Accounts receivable $90.000 Office supplies $800 Prepaid rent $3.600 Unexpired insurance $1.500 Office equipment $72.000 Accumulated depreciation : office equipment $24.000 Accounts payable $4.000 Notes payable (due 3/1/12) $60.000 Interest payable $600 Income taxes payable $9.000 Dividends payable $3.000 Unearned consulting fees $22.000 Capital stock $200.000 Retained earnings $40.000 Dividends $3.000 Consulting fees earned $500.000 Rent expense $14.700 Insurance expense $2.200 Office supplies expense $4.500 Depreciation expense : office equipment $11.000 Salaries expense $330.000 Utilities expense $4.800 Interest expense $3.000 Income taxes expense $45.000 Totals $862.600 $862.600

Instructions: a.       Prepare the necessary adjusting journal entries on December 31, 2019. Also prepare an adjusted trial balance dated December 31, 2019 (20 points). b.      From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, 2019. Also prepare the company’s balance sheet dated December 31, 2019 (20 points). c.       Prepare the necessary year-end closing entries (15 points). d.      Prepare an after-closing trial balance (15 points). e.      Compute the company’s average monthly insurance expense for January through November 2019 (10 points). f.        Compute the company’s average monthly rent expense for January through May 2019 (10 points). g.       If the company purchased all of its office equipment when it first incorporated, for how long has it been in business as of December 31, 2019? (10 points).

Answer 1

Journal Entries
31/12/19	Account Receivable …. Dr	25,000
	To Consulting fee earned	25,000
	(being accrued consulting fee recorded)
31/12/19	Unearned consulting fee … Dr.	15,000
	To Consulting fee earned	15,000
	(being unearned consultancy fee now earned)
31/12/19	Office Supplies expenses .. Dr.	500
	To Office Supplies	500
	( being 500 excess office supplies transfer to expenses)
31/12/19	Rent Expenses … Dr.	1200
	To Prepaid Rent	1200
	(being rent of Dec transfer to expenses)
31/12/19	Insurance expenses .. Dr.	250
	To Unexpired Insurance Exp.	250
	( Being dec insurance transfer to exp A/c)
31/12/19	Salaries Expenses	12000
	To Unpaid Salaries	12000
	(Being salary of dec a/c for)
31/12/19	Interest Exp … Dr.	200
	Interest Payable	200
	(being interest accrued on 60000 notes @ 4% pa for dec assume Sep, oct nov interest provided)
31/12/19	Depreciation …. Dr.	1000
	To Accumulated depreciation - office equipment	1000
	(Depreciation of dec a/c for
Adjusted Trial Balance as on 31st December 2019
	Debit	Credit
Cash	2,76,500
Account Receivable	1,15,000
Office Supplies	300
prepaid Rent	2,400
Unexpired Insurance	1,250
Office Equipment	72,000
Accumulated Depreciation
Office Equipment		25,000
Account Payable		4,000
Notes Payable (due 3/1/12)		60,000
Interest Payable		800
Income taxes Payable		9,000
Dividend Payable		3,000
Unearned Consulting fees		7,000
Salaries Payable		12,000
Capital Stock		2,00,000
Retained earning		40,000
Dividends	3,000
Consulting fee earned		5,40,000
Rent Expenses	15,900
Insurance expenses	2,450
Office Supplies expenses	5,000
Depreciation Expenses office equipment	12,000
Salaries Expenses	3,42,000
Utilities Expenses	4,800
Interest Expenses	3,200
Income Taxes	45,000
Total	9,00,800	9,00,800
Income Statement for the year ended 31st December, 2019
Consulting fee earned		5,40,000
Less :
Rent Expenses	15,900
Insurance expenses	2,450
Office Supplies expenses	5,000
Salaries Expenses	3,42,000
Utilities Expenses	4,800
Depreciation Expenses office equipment	12,000
Interest Expenses	3,200
Total Expenses		3,85,350
Net Profit		1,54,650
Income Tax		45,000
Income available for retained Earning	1,09,650
Statement of Retained Earning
Opening Balance of Retained Earning	40000
Transfer from Income Statement	1,09,650
Less : Dividend		3000
closing Retained Earning		1,46,650
Balance Sheet As at 31st December, 2019
Current Assets
Cash	2,76,500
Account Receivable	1,15,000
Office Supplies	300
prepaid Rent	2,400
Unexpired Insurance	1,250
Total Current Assets		3,95,450
Fixed Assets
Office Equipment	72,000
Less: Accumulated Depreciation	(25,000)	47,000
Total Assets		4,42,450
Current Liabilities
Account Payable	4,000
Notes Payable	60,000
Interest Payable	800
Income taxes Payable	9,000
Dividend Payable	3,000
Unearned Consulting fees	7,000
Salaries Payable	12,000
Total Current Liabilities		95,800
Shareholder fund & Retained Earnings
Capital Stock	2,00,000
Retained earning	1,46,650
TotalShareholder fund & Retained Earnings	3,46,650
Total Current Liabilities, shareholder fund & retained earning	4,42,450
Closing Entries
Consulting fee earned … Dr.	5,40,000
To Rent Expenses		15,900
To Insurance expenses		2,450
To Office Supplies expenses		5,000
To Salaries Expenses		3,42,000
To Utilities Expenses		4,800
To Depreciation Expenses office equipment	12,000
To Interest Expenses		3,200
To Income Tax		45,000
To Retained Earning		1,09,650
(being closing entries of Income A/c)
Retained Earning … Dr	3000
Dividend A/c		3000
(Being dividend transfer to Retained Earning Account)
after closing Trial Balance as on 31st December 2019
	Debit	Credit
Cash	2,76,500
Account Receivable	1,15,000
Office Supplies	300
prepaid Rent	2,400
Unexpired Insurance	1,250
Office Equipment	72,000
Accumulated Depreciation
Office Equipment		25,000
Account Payable		4,000
Notes Payable (due 3/1/12)		60,000
Interest Payable		800
Income taxes Payable		9,000
Dividend Payable		3,000
Unearned Consulting fees		7,000
Salaries Payable		12,000
Capital Stock		2,00,000
Retained earning		1,46,650
Total	4,67,450	4,67,450
Monthly Insurance expenses from January to November 2019 = 200 per month.
Monthly Rent expenses from January to May 2019 = 1500 per month.
Total Rent till Nov	14700
Rent from Jun- Nov	7200
Rent from Jan- May	7500
Per month rent	1500
g. Company is in this business for 25 months i.e. from December, 2017