Question

PROBLEM:

Skinny Enterprise has operated a business for the past two years from his home. In January 2020, she

decided to move to a lease office space. Skinny registered the business as a corporation according to

Delaware laws in January 2020. Skinny Enterprise Corporation received authorization to issue 1,500,000

common shares with $1.4 par value. During January 2020, the business entered the following transactions:

2 The following assets received from Skinny Enterprise in exchange for 175,000 common shares: Cash, $156,000; Accounts Receivable, $75,000; Office Supplies, $8,280; Prepaid Insurance $36,000 (for 24 month) and Building, $208,000. There were no liabilities assumed.

2 Borrowed $125,000 from Banco Popular with 8% of interest.

3 Paid THREE year of rent on a lease rental contract, $36,000 (recorded as Prepaid)

3 Purchased office equipment on account for $28,000.

4 Purchase a Building with a market value of $160,000 in exchange of 47,890 company shares.

4 Paid the premiums on property and casualty insurance policies, $9,000 for 18 MONTHS (recorded as Prepaid)

5 Received cash from clients as an advance payment for services to provided and recorded it as unearned fees, $34,000.

6 Invests cash not needed for operations in trading shares at 5%, $180,000.

7 Received cash from clients on account, $43,000.

10 Paid cash for a newspaper advertisement for TWO years, $2,400 (recorded as Prepaid)

11 Paid part of debt incurred on January 3, $7,000.

12 Recorded services provided on account for the period January 1-15, $48,000.

13 Recorded cash from cash clients for fees earned during January 1-15, $55,000.

15 Skinny declared cash dividends of $.30 for outstanding shares to be paid on January 31.

17 Paid telephone, cable, and internet bills for January, $1,825.

18 Issue 18,000 new shares for a market value of $2.00.

19 Paid cash for supplies, $5,700.

21 Received cash from clients on account, $38,000.

22 Received $1,575 from a leased space.

25 Paid electricity bill for January, $1,340.

26 Obtain the investor list for dividend payment on January 31

27 Paid part of debt incurred on January 3, $7,000.

30 Paid monthly office salary, $16,000; sales salaries for $24,000; and $8,000 to Skinny as General Manager of Skinny Enterprise Corporation. Deductions for FICA 6.2% and Medicare Tax 1.45%, federal income tax withheld 20%. Voluntary deductions are: United Funds $200 and Red Cross $500.

30 Recorded employer payroll taxes expense for FICA 6.2% and Medicare Tax 1.45%, 5.4% for state unemployment (SUTA tax) and .8% for federal unemployment (FUTA tax).

29 Recorded cash from cash clients for fees earned during January 16-30, $54,880

30 Recorded services provided on account for the remainder of January 16-30, $46,000.

31 Skinny paid cash dividends declared on January 15.

Instructions:

1. Journalize each transaction in a Journal

2. Prepare a General Ledger

3. Prepare an unadjusted trial balance on January 31, 2020.

4. Prepare Adjusting Entries

a. Supplies on hand on January 31 are $4,375.

b. Depreciation of office equipment for January 31, use the straight-line method (Residual value $5,000, and useful life 60 months)

c. Depreciation of building for January 31, use the straight-line method (Residual value $18,000, and useful life 120 months)

d. Unearned fees earned during January 31 are $15,000.

e. Market value in Investment in trading securities increase to $189,500.

f. Record one month of interest accrued on note payable.

g. Record one month of interest accrued on trading securities.

6. Journalize and post adjusting entries to the ledger accounts.

7. Prepare an adjusted trial balance.

8. Prepare on January 31, 2020 a Multiple Step Income Statement, a Retained Earnings Statement, Statement of Shareholder’s, and a Statement of Financial Position (Balance Sheet).

9. Journalize and post to the ledger accounts the closing entries.

10. Prepare a Post-Closing Trial Balance on January 31, 2020.

Answer 1

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