2.
Prepare
2.
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Prepare journal entry for the given transactions in a general journal.
General Journal Page 3 | ||||||
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2020 | ||||||
January | 2 | Supplies | 121 | 7,000 | ||
Cash | 101 | 7,000 | ||||
(To record purchases of supplies for cash) | ||||||
2 | Prepaid Insurance | 134 | 8,400 | |||
Cash | 101 | 8,400 | ||||
(To record purchases of insurance for one year) | ||||||
7 | Cash | 101 | 20,000 | |||
Accounts Receivable | 111 | 5,000 | ||||
Fees Income | 401 | 25,000 | ||||
(To record services performed for cash and account) | ||||||
12 | Cash | 101 | 4,000 | |||
Accounts Receivable | 111 | 4,000 | ||||
(To record receipts of cash on account) | ||||||
12 | Advertising Expense | 526 | 3,600 | |||
Cash | 101 | 3,600 | ||||
(To record payment of advertising on radio) | ||||||
13 | Cash | 101 | 4,500 | |||
Accounts Receivable | 111 | 4,500 | ||||
(To record receipts of cash on account) | ||||||
14 | Cash | 101 | 750 | |||
Supplies | 121 | 750 | ||||
(To record damage supplies return for cash) | ||||||
15 | Cash | 101 | 20,700 | |||
Accounts Receivable | 111 | 2,300 | ||||
Fees Income | 401 | 23,000 | ||||
(To record services performed for cash and account) |
Table (1)
General Journal Page 4 | ||||||
Date | Account Title and Explanation | Post. Ref. | Debit ($) | Credit ($) | ||
2020 | ||||||
January | 20 | Supplies | 121 | 5,000 | ||
Accounts Payable | 202 | 5,000 | ||||
(To record purchases of supplies on account) | ||||||
20 | Cash | 101 | 12,500 | |||
Accounts Receivable | 111 | 3,500 | ||||
Fees Income | 401 | 16,000 | ||||
(To record services performed for cash and account) | ||||||
20 | Cash | 101 | 5,600 | |||
Accounts Receivable | 111 | 5,600 | ||||
(To record the collection on account) | ||||||
21 | Maintenance Expense | 529 | 7,065 | |||
Cash | 101 | 7,065 | ||||
(To record the payment for maintenance on equipment) | ||||||
22 | Advertising Expense | 526 | 3,600 | |||
Cash | 101 | 3,600 | ||||
(To record payment of cash for newspaper ads) | ||||||
23 | Telephone Expense | 532 | 1,025 | |||
Cash | 101 | 1,025 | ||||
(To Record the payment of telephone bill) | ||||||
26 | Cash | 101 | 1,600 | |||
Accounts Receivable | 111 | 1,600 | ||||
(To record the collection on account) | ||||||
27 | Accounts Payable | 202 | 3,000 | |||
Cash | 101 | 3,000 | ||||
(To record the payment to creditors) |
Table (2)
General Journal Page 5 | ||||||
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2020 | ||||||
January | 28 | Utilities Expense | 514 | 2,675 | ||
Cash | 101 | 2,675 | ||||
(To record the payment of utility bill) | ||||||
29 | Cash | 101 | 19,000 | |||
Accounts Receivable | 111 | 2,750 | ||||
Fees Income | 401 | 21,750 | ||||
(To record services performed for cash and account) | ||||||
31 | Salaries Expense | 511 | 32,800 | |||
Cash | 101 | 32,800 | ||||
(To record payment of monthly salaries) | ||||||
31 | TE, Drawing | 302 | 12,000 | |||
Cash | 101 | 12,000 | ||||
(To record withdrawal of cash for personal use) | ||||||
31 | Maintenance Expense | 529 | 4,150 | |||
Cash | 101 | 4,150 | ||||
(To record payment of monthly maintenance services) | ||||||
31 | Equipment | 141 | 15,000 | |||
Cash | 101 | 10,000 | ||||
Accounts Payable | 202 | 5,000 | ||||
(To record the purchases of equipment for cash and on account) | ||||||
31 | Cash | 101 | 7,600 | |||
Accounts Receivable | 111 | 1,620 | ||||
Fees Income | 401 | 9,220 | ||||
(To record services performed for cash and account) |
Table (3)
4, 5 and 6.
Prepare trail balance section, indicate the given adjustments, and complete the worksheet for E Consulting Services for the month ended January 31, 2020.
4, 5 and 6.
Explanation of Solution
Worksheet: Worksheet is an accounting tool that helps accountants to record adjustments and up-date balances required to prepare financial statements. Worksheet is a central place where
Prepare trail balance section, indicate the given adjustments, and complete the worksheet for E Consulting Services for the month ended January 31, 2020.
Table (4)
7.
Prepare income statement for E Consulting Services for the month ended January 31, 2020.
7.
Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operation and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Prepare income statement for E Consulting Services for the month ended January 31, 2020.
E Consulting Services | ||
Income Statement | ||
For the Month Ended January 31, 2020 | ||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Fees Income | 94,970 | |
Expenses: | ||
Salaries Expense | 32,800 | |
Utilities Expense | 2,675 | |
Supplies Expense | 7,050 | |
Rent Expense | 4,000 | |
Insurance Expense | 700 | |
| 183 | |
Advertising Expense | 7,200 | |
Telephone Expense | 1,025 | |
Maintenance Expense | 11,215 | |
Total expenses | 66,848 | |
Net income | $28,122 |
Table (5)
8.
Prepare statement of owners’ equity for E Consulting Services for the month ended January 31, 2020.
8.
Explanation of Solution
Statement of owners’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owners’ equity. Additional capital, net income from income statement is added to, and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Prepare a statement of owners’ equity for E Consulting Services for the month ended January 31, 2020.
E Consulting Services | ||
Statement of Owners’ Equity | ||
For the Month Ended January 31, 2020 | ||
Particulars | Amount ($) | Amount ($) |
TE, Capital, January 1, 2020 | $128,667 | |
Net income for January | 28,122 | |
Less: Withdrawals for January | 12,000 | |
Increase in capital | 16,122 | |
HK, Capital, January 31, 2020 | $144,789 |
Table (6)
9.
Prepare balance sheet for E Consulting Services as at January 31, 2020.
9.
Explanation of Solution
Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and owners (owners’ equity) over those resources. The resources of the company are assets which include money contributed by owners and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and owners’ equity.
Prepare the balance sheet for E Consulting Services as at January 31, 2020.
E Consulting Services | ||
Balance Sheet | ||
January 31, 2019 | ||
Assets | ||
Cash | $112,285 | |
Accounts Receivable | 4,470 | |
Supplies | 5,200 | |
Prepaid Insurance | 7,700 | |
Equipment | $26,000 | |
Less: | 336 | 25,634 |
Total Assets | $155,289 | |
Liabilities and owner’s equity | ||
Liabilities | ||
Accounts Payable | 10,500 | |
Owners’ Equity | ||
TE, Capital | 144,789 | |
Total Liabilities and Owners’ Equity | $155,289 |
Table (7)
10.
Prepare adjusting entry for the given adjustments.
10.
Explanation of Solution
Prepare adjusting entry for supplies.
GENERAL JOURNAL | Page 6 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 31, 2019 | Supplies expense | 517 | 7,050 | |
Supplies | 121 | 7,050 | ||
(to record supplies used) |
Table (8)
Description:
- Supplies Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Supplies are an asset account. Since amount of supplies is used, asset account decreased, and a decrease in asset is credited.
Prepare adjusting entry for insurance expense:
GENERAL JOURNAL | Page 6 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 31, 2019 | Insurance expense | 535 | 700 | |
Prepaid insurance | 134 | 700 | ||
(to record part of prepaid insurance expired) |
Table (9)
Description:
- Insurance Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Prepaid Insurance is an asset account. Since amount of insurance is expired, asset account decreased, and a decrease in asset is credited.
Prepare adjusting entry for rent expense:
GENERAL JOURNAL | Page 6 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 31, 2019 | Rent expense | 520 | 4,000 | |
Prepaid rent | 137 | 4,000 | ||
(to record part of prepaid rent expired) |
Table (10)
Description:
- Rent Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Prepaid Rent is an asset account. Since amount of rent is expired, asset account decreased, and a decrease in asset is credited.
Prepare adjusting entry for depreciation expense-equipment:
GENERAL JOURNAL | Page 6 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
January 31, 2019 | Depreciation expense-Equipment | 523 | 183 | |
Accumulated depreciation-Equipment | 142 | 183 | ||
(to record depreciation expense) |
Table (11)
Description:
- Depreciation Expense, Equipment is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Accumulated Depreciation, Equipment is a contra-asset account, and contra-asset accounts would have a normal credit balance, hence, the account is credited.
11.
Prepare closing entries in general ledger.
11.
Explanation of Solution
Closing entries: The journal entries prepared to close the temporary accounts to capital account are referred to as closing entries. The revenue, expense, and drawing accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.
Steps in closing procedure:
- 1. Close the revenue accounts to Income Summary account.
- 2. Close the expense accounts to Income Summary account.
- 3. Close the Income Summary account and transfer the net income or net loss balance to the Capital account.
- 4. Close the Drawing account to Capital account.
Close the revenue accounts to Income Summary account.
GENERAL JOURNAL | Page 6 | |||||
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2019 | Fees Income | 401 | 94,970 | |||
January | 31 | Income Summary | 309 | 94,970 | ||
(Record closing of revenue to Income Summary account) |
Table (12)
Description:
- Fees income is a revenue account. Revenue account has a normal credit balance. Since revenue is closed to Income Summary account, the account is debited.
- Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. The account is credited to hold the transferred balance from revenue account.
Close the expense accounts to Income Summary account.
GENERAL JOURNAL | Page 6 | |||||
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2019 | Income Summary | 309 | 19,980 | |||
January | 31 | Salaries Expense | 511 | 32,800 | ||
Utilities Expense | 514 | 2,675 | ||||
Supplies Expense | 517 | 7,050 | ||||
Rent Expense | 520 | 4,000 | ||||
Depreciation Expense, Equipment | 523 | 183 | ||||
Advertising Expense | 526 | 7,200 | ||||
Maintenance Expense | 529 | 11,215 | ||||
Telephone Expense | 532 | 1,025 | ||||
Insurance Expense | 535 | 700 | ||||
(Record closing of expenses to Income Summary account) |
Table (13)
Description:
- Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. The account is debited to hold the transferred balance from expense accounts.
- Salaries expense, Utilities expense, Supplies expense, Rent expense, Depreciation expense, Advertising expense, Maintenance expense, Telephone expense, and Insurance expense are expense accounts. Expense account has a normal debit balance. Since expenses are closed to Income Summary account, the accounts are credited.
Close the net income to Income Summary account.
GENERAL JOURNAL | Page 6 | |||||
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2019 | Income Summary | 309 | 28,122 | |||
January | 31 | TE, Capital | 301 | 28,122 | ||
(Record closing of net income to capital account) |
Table (14)
Description:
- Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. Since net income is closed, the account is reversed; hence, the Income Summary account is debited.
- TE, Capital is a capital account. Since net income is transferred to the account, the value increased, and an increase in capital is credited.
Working Note 1:
Compute net income.
Close the Drawing account to Capital account.
GENERAL JOURNAL | Page 6 | |||||
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2019 | TE, Capital | 12,000 | ||||
January | 31 | TE, Drawing | 12,000 | |||
(Record closing of drawing to capital account) |
Table (15)
Description:
- TE, Capital is a capital account. Since drawings are transferred to the account, the value decreased, and a decrease in capital is debited.
- TE, Drawing is a capital account. Since drawings are transferred, the account is credited to reverse the previously debited effect.
1, 3, 10, and 11.
Open the general ledger account, enter the balance for January 1, 2020, and
1, 3, 10, and 11.
Explanation of Solution
Open the general ledger account, enter the balance for January 1, 2020, and post the journal entries, adjusting entries, and closing entries.
ACCOUNT: Cash ACCOUNT NO. 101 | |||||||
DATE | Item | Post Ref. | Debit ($) | Credit ($) | BALANCE | ||
Debit ($) | Credit ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 111,350 | |||
2 | J3 | 7,000 | 104,350 | ||||
2 | J3 | 8,400 | 95,950 | ||||
7 | J3 | 20,000 | 115,950 | ||||
12 | J3 | 4,000 | 119,950 | ||||
12 | J3 | 3,600 | 116,350 | ||||
13 | J3 | 4,500 | 120,850 | ||||
14 | J3 | 750 | 121,600 | ||||
15 | J4 | 20,700 | 142,300 | ||||
20 | J4 | 12,500 | 154,800 | ||||
20 | J4 | 5,600 | 160,400 | ||||
21 | J4 | 7,065 | 153,335 | ||||
22 | J4 | 3,600 | 149,735 | ||||
23 | J4 | 1,025 | 148,710 | ||||
26 | J4 | 1,600 | 150,310 | ||||
27 | J5 | 3,000 | 147,310 | ||||
28 | J5 | 2,675 | 144,635 | ||||
29 | J5 | 19,000 | 163,635 | ||||
31 | J5 | 32,800 | 130,835 | ||||
31 | J5 | 12,000 | 118,835 | ||||
31 | J5 | 4,150 | 114,685 | ||||
31 | J5 | 10,000 | 104,685 | ||||
31 | J5 | 7,600 | 112,285 |
Table (16)
ACCOUNT: Accounts Receivable ACCOUNT NO. 111 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 5,000 | |||
7 | J3 | 5,000 | 10,000 | ||||
12 | J3 | 4,000 | 6,000 | ||||
13 | J3 | 4,500 | 1,500 | ||||
15 | J4 | 2,300 | 3,800 | ||||
20 | J4 | 3,500 | 7,300 | ||||
20 | J4 | 5,600 | 1,700 | ||||
26 | J4 | 1,600 | 100 | ||||
29 | J5 | 2,750 | 2,850 | ||||
31 | J5 | 1,620 | 4,470 |
Table (17)
ACCOUNT: Supplies ACCOUNT NO. 121 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 1,000 | |||
2 | J3 | 7,000 | 8,000 | ||||
14 | J3 | 750 | 7250 | ||||
20 | J4 | 5,000 | 12,250 | ||||
31 | Adjusting | J6 | 7,050 | 5,200 |
Table (18)
ACCOUNT: Accounts Payable ACCOUNT NO. 202 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 3,500 | |||
20 | J4 | 5,000 | 8,500 | ||||
27 | J5 | 3,000 | 5,500 | ||||
31 | J5 | 5,000 | 10,500 |
Table (19)
ACCOUNT: TE, Capital ACCOUNT NO. 301 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 128,667 | |||
31 | Closing | J6 | 34,597 | 163,264 | |||
31 | Closing | J6 | 15,000 | 148,264 |
Table (20)
ACCOUNT: TE, Drawing ACCOUNT NO. 302 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | J5 | 12,000 | 12,000 | |||
31 | Closing | J6 | 12,000 |
Table (21)
ACCOUNT: Prepaid Insurance ACCOUNT NO. 134 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 2 | J3 | 8,400 | 8,400 | |||
31 | Adjusting | J6 | 700 | 7,700 |
Table (22)
ACCOUNT: Prepaid Rent ACCOUNT NO. 137 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 4,000 | |||
31 | Adjusting | J6 | 4,000 |
Table (23)
ACCOUNT: Equipment ACCOUNT NO. 141 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 11,000 | |||
31 | J5 | 15,000 | 26,000 |
Table (24)
ACCOUNT: Accumulated Depreciation-Equipment ACCOUNT NO. 142 | |||||||
DATE | Item | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 1 | Balance | ✔ | 183 | |||
31 | Adjusting | J6 | 183 | 366 |
Table (25)
ACCOUNT: Income Summary ACCOUNT NO. 309 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | Closing | J6 | 94,970 | 94,970 | ||
31 | Closing | J6 | 66,848 | 28,122 | |||
31 | Closing | J6 | 28,122 |
Table (26)
ACCOUNT: Fees Income ACCOUNT NO. 401 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 7 | J3 | 25,000 | 25,000 | |||
15 | J4 | 23,000 | 48,000 | ||||
20 | J4 | 16,000 | 64,000 | ||||
29 | J5 | 21,750 | 85,750 | ||||
31 | J5 | 9,220 | 94,970 | ||||
31 | Closing | J6 | 94,970 |
Table (27)
ACCOUNT: Salaries Expense ACCOUNT NO. 511 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | J5 | 32,800 | 32,800 | |||
31 | Closing | J6 | 32,800 |
Table (28)
ACCOUNT: Utilities Expense ACCOUNT NO. 514 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 28 | J5 | 2,675 | 2,675 | |||
31 | Closing | J6 | 2,675 |
Table (29)
ACCOUNT: Supplies Expense ACCOUNT NO. 517 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | Adjusting | J6 | 7,050 | 7,050 | ||
31 | Closing | J6 | 7,050 |
Table (30)
ACCOUNT: Rent Expense ACCOUNT NO. 520 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | Adjusting | J6 | 4,000 | 4,000 | ||
31 | Closing | J6 | 4,000 |
Table (31)
ACCOUNT: Depreciation Expense -Equipment ACCOUNT NO. 523 | |||||||
DATE | ITEM | POST.REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | Adjusting | J6 | 183 | 183 | ||
31 | Closing | J6 | 183 |
Table (32)
ACCOUNT: Advertising Expense ACCOUNT NO. 526 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 12 | J3 | 3,600 | 3,600 | |||
22 | J4 | 3,600 | 7,200 | ||||
31 | Closing | J6 | 7200 | 0 |
Table (33)
ACCOUNT: Maintenance Expense ACCOUNT NO. 529 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 21 | J4 | 7,065 | 7,065 | |||
31 | J5 | 4,150 | 11,215 | ||||
31 | Closing | J6 | 11,215 | 0 |
Table (34)
ACCOUNT: Telephone Expense ACCOUNT NO. 532 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 23 | J4 | 1,025 | 1,025 | |||
31 | Closing | J6 | 1,025 | 0 |
Table (35)
ACCOUNT: Insurance Expense ACCOUNT NO. 535 | |||||||
DATE | ITEM | POST REF. | DEBIT ($) | CREDIT ($) | BALANCE | ||
DEBIT ($) | CREDIT ($) | ||||||
2020 | |||||||
January | 31 | Adjusting | J6 | 700 | 700 | ||
31 | Closing | J6 | 700 | 0 |
Table (36)
12.
Prepare a post-closing trial balance for E Consulting Services as at January 31, 2020.
12.
Explanation of Solution
Post-closing trial balance: Post-closing trial balance is a summary of all the assets, liabilities, and capital accounts and their balances, after the closing entries are prepared. So, post-closing trial balance reports the balances of permanent accounts only.
Prepare a post-closing trial balance for E Consulting Services as at January 31, 2020.
E Consulting Services Post- closing Trial Balance January 31, 2020 | ||
Account Title |
Debit ($) |
Credit ($) |
Cash | 112,285 | |
Accounts Receivable | 4,470 | |
Supplies | 5,200 | |
Prepaid Insurance | 7,700 | |
Equipment | 26,000 | |
Accumulated Depreciation | 366 | |
Accounts Payable | 10,500 | |
TE, Capital | 144,789 | |
Total | 155,655 | 155,655 |
Table (37)
Analyze the changes of total assets, liabilities, and the ending balance of owner’s capital of by comparing the January 31, 2020 balance sheet and December 31, 2019 balance sheet.
Explanation of Solution
The total assets are increased by $23,122
The total liabilities are increased by $7,000
The Owner’s capital is increased by $16,122
Analyze the changes arisen in cash and accounts receivable accounts.
Explanation of Solution
The cash account is increased by $935
The accounts receivable account is decreased by $530
Analyze the improvement in the firm’s financial position.
Explanation of Solution
The firm’s capital is increased by $16,122
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Chapter 6 Solutions
COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
- This problem is designed to enable you to apply the knowledge you have acquired in the preceding chapters. In accounting, the ultimate test is being able to handle data in real-life situations. This problem will give you valuable experience. CHART OF ACCOUNTS You are to record transactions in a two-column general journal. Assume that the fiscal period is one month. You will then be able to complete all of the steps in the accounting cycle. When you are analyzing the transactions, think them through by visualizing the T accounts or by writing them down on scratch paper. For unfamiliar types of transactions, specific instructions for recording them are included. However, reason them out for yourself as well. Check off each transaction as it is recorded. Required 1. Journalize the transactions. (Start on page 1 of the general journal if using Excel or Working Papers.) 2. Post the transactions to the ledger accounts. (Skip this step if using CLGL.) 3. Prepare a trial balance. (If using a work sheet, use the first two columns.) 4. Data for the adjustments are as follows: a. Insurance expired during the month, 1,020. b. Depreciation of building for the month, 480. c. Depreciation of pool/slide facility for the month, 675. d. Depreciation of pool furniture for the month, 220. e. Wages accrued at July 31, 920. Your instructor may want you to use a work sheet for these adjustments. 5. Journalize adjusting entries. 6. Post adjusting entries to the ledger accounts. (Skip this step if using CLGL.) 7. Prepare an adjusted trial balance. 8. Prepare the income statement. 9. Prepare the statement of owners equity. 10. Prepare the balance sheet. 11. Journalize closing entries. 12. Post closing entries to the ledger accounts. (Skip this step if using CLGL.) 13. Prepare a post-closing trial balance. Check Figure Trial balance total, 601,941; net income, 16,293; post-closing trial balance total, 569,614arrow_forwardThis problem is designed to enable you to apply the knowledge you have acquired in the preceding chapters. In accounting, the ultimate test is being able to handle data in real life situations. This problem will give you valuable experience. CHART OF ACCOUNTS You are to record transactions in a two-column general journal. Assume that the fiscal period is one month. You will then be able to complete all of the steps in the accounting cycle. When you are analyzing the transactions, think them through by visualizing the T accounts or by writing them down on scratch paper. For unfamiliar types of transactions, specific instructions for recording them are included. However, reason them out for yourself as well. Check off each transaction as it is recorded. Required 1. Journalize the transactions. (Start on page 1 of the general journal if using Excel or Working Papers.) 2. Post the transactions to the ledger accounts. (Skip this step if using CLGL.) 3. Prepare a trial balance. (If using a work sheet, use the first two columns.) 4. Data for the adjustments are as follows: a. Insurance expired during the month, 1,000. b. Depreciation of pool structure for the month, 715. c. Depreciation of fan system for the month, 260. d. Depreciation of sailboats for the month, 900. e. Wages accrued at June 30, 810. Your instructor may want you to use a work sheet for these adjustments. 5. Journalize adjusting entries. 6. Post adjusting entries to the ledger accounts. (Skip this step if using CLGL.) 7. Prepare an adjusted trial balance 8. Prepare the income statement 9. Prepare the statement of owners equity. 10. Prepare the balance sheet. 11. Journalize closing entries. 12. Post closing entries to the ledger accounts. (Skip this step if using CLGL.) 13. Prepare a post-dosing trial balance. Check Figure Trial balance total, 281,858; net income, 7,143; post-dosing trial balance total, 263,341arrow_forwardAssume you are a newly-hired accountant for a local manufacturing firm. You have enjoyed working for the company and are looking forward to your first experience participating in the preparation of the companys financial statements for the year-ending December 31, the end of the companys fiscal year. As you are preparing your assigned journal entries, your supervisor approaches you and asks to speak with you. Your supervisor is concerned because, based on her preliminary estimates, the company will fall just shy of its financial targets for the year. If the estimates are true, this means that all 176 employees of the company will not receive year-end bonuses, which represent a significant portion of their pay. One of the entries that you will prepare involves the upcoming bond interest payment that will be paid on January 15 of the next year. Your supervisor has calculated that, if the journal entry is dated on January 1 of the following year rather than on December 31 of the current year, the company will likely meet its financial goals thereby allowing all employees to receive year-end bonuses. Your supervisor asks you if you will consider dating the journal entry on January 1 instead of December 31 of the current year. Assess the implications of the various stake holders and explain what your answer will be.arrow_forward
- Assume you are a senior accountant and have been assigned the responsibility for making the entries to close the books for the year. You have prepared the following four entries and presented them to your boss, the chief financial officer of the company, along with the company CEO, in the weekly staff meeting: As the CEO was reviewing your work, he asked the question, What do these entries mean? Can we learn anything about the company from reviewing them? Provide an explanation to give to the CEO about what the entries reveal about the companys operations this year.arrow_forwardKoftown Flowers operates 25 food supermarkets. The company’s year- end is 31December 2019.The audit manager and partner recently attended a planning meeting with the finance director andhave provided you with the planning notes below. You are the audit senior, and this is your first year on this audit. In order to familiarise yourselfwith Koftown Flowers, the audit manager has asked you to undertake some research in order togain an understanding of Koftown Flowers, so that you are able to assist in the planning process.He has then asked that you identify relevant audit risks from the notes below and also considerhow the team should respond to these risks. Koftown Flowers has spent GHS1.6 million in refurbishing all of its supermarkets; as part of thisrefurbishment programme their central warehouse has been extended and a smaller warehouse,which was only occasionally used, has been disposed of at a profit. In order to finance thisrefurbishment, a sum of GHS1.5 million was borrowed from…arrow_forwardRecord any five accounting transactions of your own choice for Ali furniture business (AFB) for the year 2019, Starting from the owner investment of $100,000. Post them in General journal, make ledger, and Trial balance for those entries. with explanation and to make it in best formate.arrow_forward
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- You are the audit senior with HLAM Chartered Accountants. Your audit manager Michael Lim has just assigned you to the audit of Fiabci Malaysia Limited (Fiabci) for the year ended 31 December 2020. The reason behind your assignment to Fiabci Limited’s audit was that you had recently been seconded for nine months to work with Fiabci’s financial reporting department. Your client is a property developer. Michael feels that your knowledge of Fiabci’s business will aid in increasing the efficiency of the current year’s audit. Fiabci has a reasonably steady growth in 2020, with sales holding up despite increasing competition from other property developers. Required (a) Identify and explain the significant threats to potential ethical problems in the audit of Fiabci Limited. (b) Suggest any relevant and practical safeguards you feel may be appropriate for the issues identified.arrow_forwardRecord any five accounting transactions of your own choice for Ali furniture business (AFB) for the year 2019, Starting from the owner investment of $100,000. Post them in General journal, make ledger, and Trial balance for those entries. with explanation.arrow_forwardBrian Marlow recently was hired to prepare Louise Michenor Consulting’s year-end financial statements. Brain just entered his CPA certificate, and Louise Michneor was one of his first clients. Louise employs a bookkeeper, Martha Hailing, who does the daily journal entries and prepares a year-to-date trial balance at the end of the of each month. Martha gives the December 31 trial to a CPA to make adjustments and generate the financial statements. As Brian was looking through Louise Michenor’s books, he noticed two things. First, in each of the last three years, a different COA had prepared the financial statements. Second, the amount shown on the December 31 trial balance for miscellaneous expense was quite high this year compared to prior years. Brian called Martha to find out is she new why miscellaneous expense had such a high balance. Martha’s response was “ I just do what Louise tells me to do. If she wants to charge personal expenses to the company, it’s none of my business “.…arrow_forward
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