A few years ago, Miguel Thorpe founded Mig T Accounting Services. Mig T is aware that you and your group members are pursuing an accounting course while in college and therefore has approached the team for advice. He wishes to know how much net income his business earned during the past year in order to decide whether to keep the company going. His accounting records consist of a trial balance and some additional notes required to make adjustments to the financial statements. The company unadjusted trial balance for the year ended December 31st, 2021, was shown as follows: Mig T Accounting Services Trial Balance December 31st, 2021 DR CR Cash 120,000 Accounts receivable 65,000 Supplies 25,000 Lease Hold Improvement 100,000 Accumulated depreciation - Leasehold Improvement 40,000 Furniture and Fixtures 500,000 Accumulated depreciation - Furniture and Fittings 300,000 Accounts payable 25,000 Salary Payable Unearned service revenue 18,500 Miguel, Capital 223,200 Miguel, Withdrawal 148,000 Service revenue 398,800 Salary expense 39,000 Supplies Expense Rent Expense Depreciation expense -Leasehold Improvement Depreciation expense - Furniture and Fixtures Advertising expense 8,500 1,005,500 1,005,500 Data presented for the adjusting entries include the following: a. Rent expense of $100,000 paid for the year was debited to Mig T’s withdrawal account as a result of an oversight on the part of the Data Entry Clerk and this remained unadjusted as at year end. b. The company paid $13,000 on account for a credit purchase made earlier in the year but this entry was not recorded at year end. c. Supplies on hand at year end, $15,000. d. Depreciation on Leasehold improvement, $20,000. e. Depreciation on Furniture and Fixtures, $100,000. f. Salaries owed but not yet paid, $12,000. g. Accrued service revenue, $18,000. h. $14,000 of the unearned service revenue has been earned. Requirements: A. Explain why adjusting entries are required. B. Prepare the adjusting journal entries at December 3st, 2021 in the general journal. C. Open the ledger accounts in T-account form with their unadjusted balances then post the adjusting entries to the affected accounts, then balance off each account.
A few years ago, Miguel Thorpe founded Mig T Accounting Services. Mig T is aware that you and your group members are pursuing an accounting course while in college and therefore has approached the team for advice. He wishes to know how much net income his business earned during the past year in order to decide whether to keep the company going. His accounting records consist of a
Mig T Accounting Services
Trial Balance
December 31st, 2021
DR
CR
Cash
120,000
65,000
Supplies
25,000
Lease Hold Improvement
100,000
40,000
Furniture and Fixtures
500,000
Accumulated depreciation - Furniture and Fittings
300,000
Accounts payable
25,000
Salary Payable
Unearned service revenue
18,500
Miguel, Capital
223,200
Miguel, Withdrawal
148,000
Service revenue
398,800
Salary expense
39,000
Supplies Expense
Rent Expense
Depreciation expense -Leasehold Improvement
Depreciation expense - Furniture and Fixtures
Advertising expense
8,500
1,005,500
1,005,500
Data presented for the
a. Rent expense of $100,000 paid for the year was debited to Mig T’s withdrawal account as a result of an oversight on the part of the Data Entry Clerk and this remained unadjusted as at year end.
b. The company paid $13,000 on account for a credit purchase made earlier in the year but this entry was not recorded at year end.
c. Supplies on hand at year end, $15,000.
d. Depreciation on Leasehold improvement, $20,000.
e. Depreciation on Furniture and Fixtures, $100,000.
f. Salaries owed but not yet paid, $12,000.
g. Accrued service revenue, $18,000.
h. $14,000 of the unearned service revenue has been earned.
Requirements:
A. Explain why adjusting entries are required.
B. Prepare the adjusting
C. Open the ledger accounts in T-account form with their unadjusted balances then
D. Prepare the income statement, the statement of owner’s equity and balance sheet as at December 31st, 2021.
E. Advice Miguel if he should continue the business given the company’s financial performance.
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