Question

Alex Alex established Alex Consulting Company on September 1, 2018, as a backup plan.

The company had the following transactions during September.

Sept. 1 – The company sold shares of common stock for $30,000 cash.

Sept. 1 – The company purchased a one-year insurance policy for $300 in cash.

Sept. 1 – The company purchased office equipment costing $8,000 by signing a 6% note. The Equipment has a 5 year life and no salvage value. The note requires monthly principal payments of $225 beginning on October 1st until the balance is paid.

Sept. 10 – The company purchased $735 of office supplies for cash.

Sept. 15 – The company paid legal and registration fees to register their trademark which is his nickname “Sanchize.” The fees incurred totaled $4,000, which were paid in cash.

Sept. 29 – The company billed customers $5,500 for consulting services performed.

Sept. 30 – The company paid $1,450 for employee’s salary.

Sept. 30 – Since the company had a good month so Sanchez declared a $1,000 dividend to be paid on October 10th.

Additional Information:

On September 30th, the company took an inventory of the supplies and found that they had $500 of supplies on hand.

Equipment purchased before the 15th of the month are depreciated for a whole month using the straight-line method.

On October 3rd received the September utilities bill for $188.

Required:

Journalize the transactions.

Prepare the adjusting entries.

Post all entries to the accounts.

Prepare a Single-Step Income Statement, Retained Earnings Statement and a Classified Balance Sheet for his first month of operations.

Prepare the closing entries.

Comment on the company’s liquidity, capital structure and financial flexibility and their overall financial position.

Answer 1

	Alex Alex
	General Journal
Date	Journal	Amount (DR)	Amount (CR)
01-Sep	Cash	$                       30,000.00
	To Common Stock		$                               30,000.00
	(Being amount of sale of common stock)
01-Sep	Prepaid Insurance	$                             300.00
	To Cash		$                                     300.00
	(Being amount of purchased of one year insurance policy)
01-Sep	Office Equipment	$                         8,000.00
	To Notes Payable		$                                 8,000.00
	(Being amount of Equipment purchased by issuing note payable)
10-Sep	Office Supplies	$                             735.00
	To Cash		$                                     735.00
	(Being amount of Office supplies purchased)
15-Sep	Legal Expenses	$                         4,000.00
	To Cash		$                                 4,000.00
	(Being amount of legal and registeration expenses)
29-Sep	Accounts Receivable	$                         5,500.00
	To Service Revenue		$                                 5,500.00
	(Being amount of Service Revenue)
30-Sep	Employees Salaries	$                         1,450.00
	To Cash		$                                 1,450.00
	(Being amount of Service Revenue)
30-Sep	Dividend	$                         1,000.00
	To Dividend Payable		$                                 1,000.00
	(Being amount of dividend declared )
	Adjusting Entries
Date	Particular	Amount (Dr)	Amount(Cr)
30-Sep	Office supplies Expenses=($735-$500)	$                             235.00
	To Office Supplies		$                                     235.00
	(Being amount of Dep)
30-Sep	Depreciation($8000/5)/12	$                             133.00
	To Accumulated Depreciation		$                                     133.00
	(Being amount of Accumulated Depreciation on Equipment)
30-Sep	Insurance=($300/12)	$                               25.00
	To Prepaid Insurance		$                                       25.00
	(Being amount of one month insurance expired)
30-Sep	Interest Expenses($8000*6%)/12	$                               40.00
	To Interest Payable		$                                       40.00
	(Being amount of interest payable )
30-Sep	Utilties Expenses	$                             188.00
	To Utilities Expenses Payable		$                                     188.00
	(Being amount of 4 months rent)
	Cash A/c			Balance
Date	Title	Debit	Credit	Debit	Credit
01-Sep	Common Stock	$                       30,000.00		30000
01-Sep	Prepaid Insurance		$                                     300.00	$          29,700.00
10-Sep	Office Supplies		$                                     735.00	$          28,965.00
15-Sep	Legal Expenses		$                                 4,000.00	$          24,965.00
30-Sep	Employees Salaries		$                                 1,450.00	$          23,515.00
	Common Stock			Balance
Date	Title	Debit	Credit	Debit	Credit
01-Sep	Cash		$                               30,000.00		$ 30,000.00
	Prepaid Insurance
Date	Title	Debit	Credit	Debit	Credit
01-Sep	Insurance	$                             300.00		$                300.00
30-Sep			$                                       25.00	$                275.00
	Insurance
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Prepaid Insurance	$                               25.00		$                  25.00
	Legal Fees
Date	Title	Debit	Credit	Debit	Credit
15-Sep	Cash	$                         4,000.00		$            4,000.00
	Office supplies
Date	Title	Debit	Credit	Debit	Credit
10-Sep	Cash	$                             735.00		$                735.00
30-Sep	Office Supplies Expenses		$                                     235.00	$                500.00
	Office supplies Expenses
Date	Title	Debit	Credit	Debit	Credit
30-Sep		$                             235.00		$                235.00
	Utitlites Expenses
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Utitlites Expesnes Payable	$                             188.00		$                188.00
	Utitlies Expenses Payable
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Utitlites Expenses		$                                     188.00	$                         -	$        188.00
	Office Equipment
Date	Title	Debit	Credit	Debit	Credit
01-Sep	Note Payable	$                         8,000.00		$            8,000.00
	Depreciation-Office Equipment
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Accumulated Depreciation	$                             133.00		$                133.00
	Depreciation-Office Equipment
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Accumulated Depreciation	$                             133.00		$                133.00
	Note Payable
Date	Title	Debit	Credit	Debit	Credit
01-Sep	Office Equipment		$                                 8,000.00	$                         -	$    8,000.00
	Account Receivable
Date	Title	Debit	Credit	Debit	Credit
29-Sep	Service Revenue	$                         5,500.00		$            5,500.00
	Service Revenue
Date	Title	Debit	Credit	Debit	Credit
30-Sep			$                                 5,500.00		$    5,500.00
				$                         -
	Employees Salary
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Cash	$                         1,450.00		$            1,450.00
	Dividend
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Dividend Payable	$                         1,000.00		$            1,000.00
	Dividend Payable
Date	Title	Debit	Credit	Debit	Credit
30-Sep	Dividend		$                                 1,000.00		$    1,000.00
	Alex, Alex
	Adjusted Trial Balance
	Trial Balnce
	Particular	Amount (Dr)	Amount (Cr)
	Cash=	$                       23,515.00
	Accounts receivable	$                         5,500.00
	Prepaid Insurance	$                             275.00
	Office Supplies	$                             500.00
	Equipment	$                         8,000.00
	Utilities Expenses Payable		$                                     188.00
	Interest Payable		$                                       40.00
	Dividend Payable		$                                 1,000.00
	Accumulated Depreciation		$                                     133.00
	Common stock		$                               30,000.00
	Note Payable		$                                 8,000.00
	Service Revenue		$                                 5,500.00
	Salaries expenses	$                         1,450.00
	Legal fees expenses	$                         4,000.00
	Office Supplies expenses	$                             235.00
	Utitlties Expenses	$                             188.00
	Dividend	$                         1,000.00
	Interest	$                               40.00
	Depreciation	$                             133.00
	Insurance	$                               25.00
	Total	$                       44,861.00	$                               44,861.00
	Income Statement
	September 30th
	Service Revenue		$                                 5,500.00
	Expenses
	Salaries expenses	$                         1,450.00
	Legal fees expenses	$                         4,000.00
	Office Supplies expenses	$                             235.00
	Utitlties Expenses	$                             188.00
	Interest	$                               40.00
	Depreciation	$                             133.00
	Insurance	$                               25.00	$                                 6,071.00
	Net Income		$                                   (571.00)
	Less: dividend		$                                 1,000.00
	Retained Earnings		$                               (1,571.00)
	Balance Sheet as at November 30th,2013
	Assets
	Current Assets
	Cash	$                       23,515.00
	Accounts Receivable	$                         5,500.00
	Office Supplies	$                             500.00
	Prepaid Insurance	$                             275.00
	Total Current Assets		$                               29,790.00
	Office Equipment	$                         8,000.00
	Less : Accumulted Depreciation	$                          (133.00)	$                                 7,867.00
	Total Assets		$                               37,657.00
	Liabilities
	Current Liabilities
	Utilites Expenses Payable	$                             188.00
	Interest Payable	$                               40.00
	Dividend Paayble	$                         1,000.00
	Total Current liabilities		$                                 1,228.00
	Note Payable		$                                 8,000.00
	Stock holder's equity
	Common Stock	$                       30,000.00
	Retained Earnings	$                       (1,571.00)	$                               28,429.00
	Total Liabilities & Stockholder's equity		$                               37,657.00