Question

Roth Contractors Corporation was incorporated on December 1, 2019 and had the following transactions during December:

Part A a. Issued common stock for $5,000 cash

b. Paid $1,200 cash for three months’ rent: December 2019; January and February 2020

c. Purchased a used truck for $10,000 on credit (recorded as an account payable)

d. Purchased $1,000 of supplies on credit. These are expected to be used during the month (recorded as expense)

e. Paid $1,800 for a one-year truck insurance policy, effective December 1

f. Billed a customer $4,500 for work completed to date

g. Collected $800 for work completed to date

h. Paid the following expenses in cash: advertising, $350; interest, $100; telephone, $75; truck operating, $425; wages, $2,500

i. Collected $2,000 of the amount billed in f above

j. Billed customers $6,500 for work completed to date

k. Signed a $9,000 contract for work to be performed in January 2020

l. Paid the following expenses in cash: advertising, $200; interest, $150; truck operating, $375; wages, $2,500

m. Collected a $2,000 advance on work to be done in January (the policy of the corporation is to record such advances as revenue at the time they are received)

n. Received a bill for $100 for electricity used during the month (recorded as utilities expense).

Part B The following information relates to December 31, 2019:

o. One month of the prepaid insurance has expired.

p. The December portion of the rent paid on December 1 has expired.

q. A physical count indicates that $350 of supplies is still on hand.

r. The amount collected in transaction m is unearned at December 31.

s. Three days of wages for December 29, 30, and 31 are unpaid, amounting to $1,500. These will be paid in January.

t. The truck has an estimated useful life of 4 years.

u. Income taxes expense is $500. This amount will be paid in the next fiscal year.

Required:

5. Prepare all necessary adjusting entries. General ledger account numbers and descriptions are not necessary.

7. Prepare an adjusted trial balance at December 31.

8. Assume the fiscal year-end is December 31, 2019. Prepare an income statement, statement of changes in equity, and balance sheet.

9. Prepare closing entries and a post-closing trial balance at December 31, 2019

Answer 1

Ans: Roth Contractors Corporation was incorporated on December 1, 2019

   Journal Entries

Date	Particulars		Debit ($)	Credit ($)
a)	Cash A/c Dr. To Common Stock A/c (being entry for issue of common stock)		5,000	5,000
b)	Rent Expenses A/c Dr. Prepaid Rent Expenses A/c Dr. To Cash A/c (Being Entry for payment of Rent For December , January and February)		400 800	1,200
c)	Truck A/c Dr.    To Account payable A/c (being Entry for Purchase of Truck on credit)		10,000	10,000
d)	Supplies A/c Dr. To Account payable A/c (being entry for purchase of Supplies)		1,000	1,000
e)	Insurence Expenses A/c Dr. Prepaid Insurence A/c Dr.    To Cash A/c (being entry for Insurence premium paid)		150 1,650	1,800
f)	Sales A/c Dr. To Account receivable A/c (Being entry for Sales accounted for the bill raised to the customer)		4,500	4,500
g)	Cash A/c Dr.    To Account Receivable A/c (being cash from Account Receivable A/c )		800	800
h)	Advertisement expenses A/c Dr. Truck Operating Expenses A/c Dr. Interest A/c Dr. Telephone Expenses A/c Dr. Wages A/c Dr. To Cash A/c (Being Expenses Paid)		350 425 100 75 2,500	3,450
i)	Cash A/c Dr. To Account receivable a/c (being Cash Received from Account receivable)		2,000	2,000
j)	Sales A/c Dr. To Account receivable A/c (Being entry for Sales accounted for the bill raised to the customer)		6,500	6,500
k)	No Entry
l)	Advertisement expenses A/c Dr. Truck Operating Expenses A/c Dr. Interest A/c Dr. Wages A/c Dr. To Cash A/c (Being Expenses Paid)		200 375 150 2,500	3,225
m)	Cash A/c Dr. To Sales A/c (Being Cash received as advance for the contract to be started in January)		2,000	2,000
n)	Utility expense A/c Dr.    To Account Payable A/c (being Entry for electricity bill for the month of December)		100	100
q)	Cost of goods sold A/c Dr.    To Supplies A/c ( being entry for use of Supplies )		650	650
r)	Sales A/c Dr.    To Unearned revenue A/c (Being Entry for recording unearned revenue)		2,000	2,000
s)	Wages A/c Dr. To Accounts payable A/c ( being entry for the recording wages for 29,30,31 of December)		1,500	1,500
t)	Depreciation A/c Dr. To Accumulated Depreciation A/c ( being Entry for Recording Depreciation through Accumulated Depreciation A/c )	(10,000/4)*(1/12)	208	208
u)	Tax Expenses A/c Dr. To Provision For Tax A/c (being Tax expenses recorded)		500	500

2) Trial Balance

Particulars			Dr. ($)	Cr.($)
Cash	(5,000-1,200-1,800+800-3,450+2,000-3,225+2,000)		125
Account receivable	(4,500-800-2,000+6,500)		8,200
Account payable	(10,000+1,000+1,500+100)			12,600
Cost of Goods sold			650
Tax			500
Accumulated Depreciation				208
Truck			10,000
Unearned revenue				2,000
Provision for tax				500
Truck Operating Expenses	425+375		800
Sales	4,500+6,500+2,000-2,000			11,000
Supplies			350
Advertisement Expenses	350+200		550
Telephone expenses			75
Interest			250
Wages	(2,500+2,500+1,500)		6,500
Common Stock				5,000
Depreciation			208
Prepaid Insurence			1,650
Prepaid Rent			800
Rent Expenses			400
Insurence Expenses			150
Utility expense			100
Total			31,308	31,308

3)

Income statement

Particulars		Amount ($)
Sales		11,000
Less
Cost of Goods Sold		650
Advertisement expenses		550
Telephone expenses		75
Utility expense		100
Rent Expenses		400
Insurence Expenses		150
Depreciation		208
Wages		6,500
Interest		250
Tax		500
Truck Operation expenses		800
Net Income		817

Financial Statement

Particulars		Amount ($)
Common Stock And Liabilities
Common Stock		5,000
Retained Earnings		817
Account payable		12,600
Provision for tax		500
Unearned revenue		2,000
Total		20,917
Assets
Truck	10,000
Accumulated depreciation	(208)	9,792
Prepaid rent		800
Prepaid Insurence		1650
Supplies		350
Cash		125
Account Receivable		8,200
Total		20,917

4) Closing Journal Entries

Date	Particulars		Dr.($)	Cr.($)
	Profit and Loss A/c Dr. To Cost of Goods Sold A/c To Advertisement Expenses A/c To Utilities Expenses A/c To Truck operation Expenses A/c To Telephone Expenses A/c To Rent Expenses A/c To Insurance Expenses A/c To Interest A/c To wages A/c To Depriciation A/c To Tax A/c (Being closing entry passed)		10,183	650 550 100 800 75 400 150 250 6,500 208 500
	Sales A/c Dr. To Profit and Loss A/c (being Closing entry passed)		11,000	11,000

Post- Closing Trial Balance

Particulars			Dr. ($)	Cr.($)
Cash	(5,000-1,200-1,800+800-3,450+2,000-3,225+2,000)		125
Account receivable	(4,500-800-2,000+6,500)		8,200
Account payable	(10,000+1,000+1,500+100)			12,600
Cost of Goods sold
Tax
Accumulated Depreciation				208
Truck			10,000
Unearned revenue				2,000
Provision for tax				500
Truck Operating Expenses
Sales
Supplies			350
Advertisement Expenses
Telephone expenses
Interest
Wages
Common Stock				5,000
Depreciation
Prepaid Insurence			1,650
Prepaid Rent			800
Rent Expenses
Insurence Expenses
Profit And Loss A/c				817
Total			21,125	21,125