Question

Colton Enterprises experienced the following events for Year 1, the first year of operation: Acquired $45,000 cash from the issue of common stock. Paid $13,000 cash in advance for rent. The payment was for the period April 1, Year 1, to March 31, Year 2. Performed services for customers on account for $92,000. Incurred operating expenses on account of $40,000. Collected $70,500 cash from accounts receivable. Paid $31,000 cash for salary expense. Paid $32,000 cash as a partial payment on accounts payable. Adjusting Entries Made the adjusting entry for the expired rent. (See Event 2.) Recorded $4,400 of accrued salaries at the end of Year 1. Events for Year 2 Paid $4,400 cash for the salaries accrued at the end of the prior accounting period. Performed services for cash of $41,000. Purchased $3,800 of supplies on account. Paid $13,500 cash in advance for rent. The payment was for one year beginning April 1, Year 2. Performed services for customers on account for $108,000. Incurred operating expenses on account of $51,500. Collected $99,000 cash from accounts receivable. Paid $49,000 cash as a partial payment on accounts payable. Paid $32,500 cash for salary expense. Paid a $13,000 cash dividend to stockholders. Adjusting Entries Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in Year 1.) Recorded supplies expense. A physical count showed that $400 of supplies were still on hand.

b. Post the Year 1 events to T-accounts.

Answer 1

Journal Entries for Year 1
			$	$
1	Cash	Debit	45,000.00
	Common Stock	Credit		45,000.00
2	Prepaid Rent	Debit	13,000.00
	Cash	Credit		13,000.00
3	Accounts Receivable	Debit	92,000.00
	Services Rendered	Credit		92,000.00
4	Operating Expenses	Debit	40,000.00
	Accounts payable	Credit		40,000.00
5	Cash	Debit	70,500.00
	Accounts Receivable	Credit		70,500.00
6	Salary	Debit	31,000.00
	Cash	Credit		31,000.00
7	Accounts Payable	Debit	32,000.00
	Cash	Credit		32,000.00
8	Rent	Debit	9,750.00
	Prepaid Rent	Credit		9,750.00
9	Salary	Debit	4,400.00
	Salary Accruals	Credit		4,400.00

Year 1 T-Accounts

Cash
Common Stock	45,000	Prepaid Rent	13,000
Accounts Receivable	70,500	Salary	31,000
		Accounts Payable	32,000
		Balance c/f	39,500
	115,500		115,500

Common Stock
		Cash	45,000

Prepaid Rent
Cash	13,000	Rent	9,750
		Balance c/f	3,250
	13,000		13,000

Accounts Receivables
Services Rendered	92,000	Cash	70,500
		Balance c/f	21,500
	92,000		92,000

Services Rendered
		Accounts Receivable	92,000

	Operating Expenses
Accounts Payable	40,000

Accounts Payable
Cash	32,000	Operating Expenses	40,000
Balance c/f	8000
	40,000		40,000

Salary
Cash	31,000
Salary Accruals	4,400

Salary Accruals
		Salary	4,400

Rent
Prepaid Rent	9,250