Question

Financial Accounting 17th edition chapter 5 5PSA step by step solution

Next Job, Inc., provides employment consulting services. The company adjusts its accounts monthly but performs closing entries annually on December 31. The firm’s unadjusted trial balance dated December 31, current year, is shown as follows.

Other Data

Accrued but unrecorded and uncollected consulting fees earned total $25,000 at December 31, current year.

The company determined that $15,000 of previously unearned consulting services fees had been earned at December 31, current year.

Office supplies on hand at December 31 total $300.

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 (72 months).

The company prepaid its nine-month rent agreement on June 1, current year.

The company prepaid its six-month insurance policy on December 1, current year.

Accrued but unpaid salaries total $12,000 at December 31, current year.

On September 1, current year, the company borrowed $60,000 by signing an 8-month, 4 percent note payable. The entire amount, plus interest, is due on March 1, next year.

The company’s accounting firm estimates that income taxes expense for the entire year is $50,000. The unpaid portion of this amount is due early in the next year.

page 243

NEXT JOB, INC.

UNADJUSTED TRIAL BALANCE

DECEMBER 31, CURRENT YEAR

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 3/1/16) 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

Prepare the necessary adjusting journal entries on December 31, current year. Also prepare an adjusted trial balance dated December 31, current year.

From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, current year. Also prepare the company’s balance sheet dated December 31, current year.

Prepare the necessary year-end closing entries.

Prepare an after-closing trial balance.

Answer 1

1.

NEXT JOB INC.
Adjusting Journal entries December31 , Curent Year
Date	Account Title	Debit	Credit
Dec.31	Accounts Receivable	25000
	Consulting Fee Earned		25000
	(Accrued and uncollected consulting fee)
Dec.31	Unearhed Consulting Fee	15000
	Consulting Fee Earned		15000
	(Unearned consulting fee earned in December)
Dec.31	Office Supplies Expense	500
	Office Supplies		500
	(Office supplies used in December)
Dec.31	Depreciation Expense - Office Equipment	1000
	Accumulated Depreciation - Office Equipment		1000
	(Depreciation expense for December)
Dec.31	Rent Expense	1200
	Prepaid Rent		1200
	(Rent expense for De
Dec.31	Insurance Expense	250
	Unexpired Insurance		250
	(Insurance Expense for December)
Dec.31	Salaries Expense	12000
	Salaries Payable		12000
	(Accrued and unpaid salaries on December 31)
Dec.31	Interest Expense	200
	Interest Payable		200
	(Interest on note payable for December)
Dec.31	Income Tax Expense	5000
	Income Tax Payable		5000
	(Income tax expense for the balace recorded)
	Balance in Prepaid Rent account	3600
	Prepaid rent paid on June.1 for nine months.
	Period expired upto Nov.30	6 months
	Remaining period for the balance	3 months
	Monthly rent expense (3,600 / 3)	1200
	Balance in unexpired insurance	1500
	Period of the policy	6 months
	Monthly insurance expense (1,500 / 6)	250
	Note payable	60000
	Rate of interest	4%
	Monthly interest (60,000*8%/12)	200

2.

NEXT JOB INC.
Adjusted Trial Balance
for the year ended December 31, Current Year
	Adjusted Trial Bal.
Account	Debit	Credit
Cash	276500
Accounts Receivable	115000
Office Supplies	300
Prepaid Rent	2400
Unexpired Insurance	1500
Office Equipment	72000
Accumulated Depreciation - Office Equipment		25000
Acounts Payable		4000
Notes Payable		60000
Interest Payable		800
Salaries Payable		12000
Income Tax Payable		14000
Dividends Payable		3000
Unearned Consulting Fees		7000
Capital Stock		200000
Retained Earnings		40000
Dividends	3000
Consulting Fee Earned		540000
Rent Expense	15900
Insurance Expense	2200
Office Supplies Expense	5000
Depreciation Expense - Office Equipment	12000
Salaries Expense	342000
Interest Expense	5000
Utilities Expense	3000
Income Tax Expense	50000
Totals	905800	905800

3.

NEXT JOB INC.
Statement of Retained Earnings
for the year ended December 1, Current Year
Retained Earnings, January 1	40000
Add: Net income	104900
	144900
Less: Dividends	-3000
Retained Earnings, December 31	141900
NEXT JOB INC.
Balance Sheet
December 31, Current Year
Assets
Current Assets
Cash		276500
Accounts Receivable		115000
Office Supplies		300
Prepaid Rent		2400
Unexpired Insurance		1500
Total Current Assets		395700
Office Equipment	72000
Accumulated Depreciation - Office Equipment	25000	47000
Total Assets		442700
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable		4000
Notes Payable		60000
Interest Payable		800
Salaries Payable		12000
Income Tax Payable		14000
Dividends Payable		3000
Unearned Consulting Fees		7000
Total liabilities		100800
Stockholders' Equity
Capital Stock	200000
Retained Earnings	141900
Total stockholders' equity		341900
Total Liabilities and Stockholders' Equity		442700

4.

NEXT JOB INC.
Closing Journal entries December31 , Curent Year
Date	Account Title	Debit	Credit
1	Consultation Fee Earned
	Income Summary
	(Closing of revenue to income summary)
2	Income Summary	435100
	Rent Expense		15900
	Insurance Expense		2200
	Office Supplies Expense		5000
	Depreciation Expense - Office Equipment		12000
	Salaries Expense		342000
	Interest Expense		5000
	Utilities Expense		3000
	Income Tax Expense		50000
	(Closing of expenses to income summary)
3	Income Summary	104900
	Retained Earnings		104900
	(Closing of income summary to retained earnings)
4	Retained Earnings	3000
	Dividends		3000
	(Closing of dividend to retained earnings)

5.

NEXT JOB INC.
Closing Trial Balance
December 31, Curent Year
Account Title	Debit	Credit
Cash	276500
Accounts Receivable	115000
Office Supplies	300
Prepaid Rent	2400
Unexpired Insurance	1500
Office Equipment	72000
Accumulated Depreciation - Office Equipment		25000
Acounts Payable		4000
Notes Payable		60000
Interest Payable		800
Salaries Payable		12000
Income Tax Payable		14000
Dividends Payable		3000
Unearned Consulting Fees		7000
Capital Stock		200000
Retained Earnings		141900
Total	467700	467700