Concept explainers
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2018. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions:
May 3. | Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $4,500. |
5. | Received cash from clients on account, $2,450. |
9. | Paid cash for a newspaper advertisement, $225. |
13. | Paid Office Station Co. for part of the debt incurred on April 5, $640. |
15. | Recorded services provided on account for the period May 1–15, $9,180. |
16. | Paid part-time receptionist for two weeks’ salary including the amount owed on April 30, $750. |
17. | Recorded cash from cash clients for fees earned during the period May 1-16, $8,360. |
Record the following transactions on Page 6 of the journal: | |
20. | Purchased supplies on account, $735. |
21. | Recorded services provided on account for the period May 16-20,$4,820. |
25. | Recorded cash from cash clients for fees earned for the period May 17- 23, $7,900. |
27. | Received cash from clients on account, $9,520. |
28. | Paid part-time receptionist for two weeks’ salary, $750. |
30. | Paid telephone bill for May, $260. |
31. | Paid electricity bill for May, $810. |
31. | Recorded cash from cash clients for fees earned for the period May 26-31, $3,300. |
31. | Recorded services provided on account for the remainder of May, $2,650. |
31. | Paid dividends, $10,500. |
Instructions
- 1. The cl1art of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing
trial balance as of April 30, 2018, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2018, and place a check mark (✓) in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting on Page 5 of the journal and using Kelly Consulting’s chart of accounts. (Do not insert the account numbers in the journal at this time.) - 2. Post the journal to a ledger of four-column accounts.
- 3. Prepare an unadjusted trial balance.
- 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
- (A) Insurance expired during May is $275.
- (B) Supplies on hand on May 31 are $715.
- (C)
Depreciation of office equipment for May is $330. - (D) Accrued receptionist salary on May 31 is $325.
- (E) Rent expired during May is $1,600.
- (F) Unearned fees on May 31 are $3,210.
- 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet.
- 6. Journalize and post the
adjusting entries . Record the adjusting entries on Page 7 of the journal. - 7. Prepare an adjusted trial balance.
- 8. Prepare an income statement, a
retained earnings statement, and a balance sheet. - 9. Prepare and
post the closing entries. Record the closing entries on Page 8 of d1e journal. (Income Summary is account #34 in d1e chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. - 10. Prepare a post-closing trial balance.
(1)
Journal:
Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
T-Accounts:
T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
Adjusted trial balance:
end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.
The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
Adjusting entries:
An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the
Spreadsheet: A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger.
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 drawing is deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Income statement:
An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.
Balance sheet:
A balance sheet is a financial statement consists of the assets, liabilities, and the stockholder’s equity of the company. The balance of the assets account must be equal to that of the liabilities and the stockholder’s equity account.
Closing entries:
Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance.
Post-Closing Trial Balance:
After passing all the journal entries and the closing entries of the permanent accounts and then further posting them to each of the respective accounts, a post-closing trial balance is prepared which consists of a list of all the permanent accounts. A post-closing trial balance serves as an evidence to prove that the balance of the permanent accounts is equal.
To journalize: The transactions of May in a two column journal beginning on page 5.
Explanation of Solution
Journalize the transactions of May in a two column journal beginning on page 5.
Journal Page 5 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2018 | 3 | Cash | 11 | 4,500 | |
May | Unearned fees | 23 | 4,500 | ||
(To record the cash received for the service yet to be provide) | |||||
5 | Cash | 11 | 2,450 | ||
Accounts receivable | 12 | 2,450 | |||
(To record the cash received from clients) | |||||
9 | Miscellaneousexpense | 59 | 225 | ||
Cash | 11 | 225 | |||
(To record the payment made for Miscellaneous expense) | |||||
13 | Accounts payable | 21 | 640 | ||
Cash | 11 | 640 | |||
(To record the payment made to creditors on account) | |||||
15 | Accounts receivable | 12 | 9,180 | ||
Fees earned | 41 | 9,180 | |||
(To record the revenue earned and billed) | |||||
14 | Salary Expense | 51 | 630 | ||
Salaries payable | 22 | 120 | |||
Cash | 11 | 750 | |||
(To record the payment made for salary) | |||||
Cash | 11 | 8,360 | |||
17 | Fees earned | 41 | 8,360 | ||
(To record the receipt of cash) |
Table (1)
Journal Page 6 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2018 | 18 | Supplies | 14 | 735 | |
May | Accounts payable | 21 | 735 | ||
(To record the payment made for automobile expense) | |||||
21 | Accounts receivable | 12 | 4,820 | ||
Fees earned | 41 | 4,820 | |||
(To record the payment of advertising expense) | |||||
25 | Cash | 11 | 7,900 | ||
Fees earned | 41 | 7,900 | |||
(To record the cash received from client for fees earned) | |||||
27 | Cash | 11 | 9,520 | ||
Accounts receivable | 12 | 9,520 | |||
(To record the cash received from clients) | |||||
28 | Salary expense | 51 | 750 | ||
Cash | 11 | 750 | |||
(To record the payment of salary) | |||||
30 | Miscellaneous Expense | 59 | 260 | ||
Cash | 11 | 260 | |||
(To record the payment of telephone charges) | |||||
31 | Miscellaneous Expense | 59 | 810 | ||
Cash | 11 | 810 | |||
(To record the payment of electricity charges) | |||||
31 | Cash | 11 | 3,300 | ||
Fees earned | 41 | 3,300 | |||
(To record the cash received from client for fees earned) | |||||
31 | Accounts receivable | 12 | 2,650 | ||
Fees earned | 41 | 2,650 | |||
(To record the revenue earned and billed) | |||||
31 | Dividends | 33 | 10,500 | ||
Cash | 11 | 10,500 | |||
(To record the drawing made for personal use) |
Table (2)
(2), (6) and (9)
To record: The balance of each accounts in the appropriate balance column of a four-column account and post them to the ledger.
Explanation of Solution
Account: Cash Account no.11 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 22,100 | |||
3 | 5 | 4,500 | 26,600 | ||||
5 | 5 | 2,450 | 29,050 | ||||
9 | 5 | 225 | 28,825 | ||||
13 | 5 | 640 | 28,185 | ||||
16 | 5 | 750 | 27,435 | ||||
17 | 5 | 8,360 | 35,795 | ||||
25 | 6 | 7,900 | 43,695 | ||||
27 | 6 | 9,520 | 53,215 | ||||
28 | 6 | 750 | 52,465 | ||||
30 | 6 | 260 | 52,205 | ||||
31 | 6 | 810 | 51,395 | ||||
31 | 6 | 3,300 | 54,695 | ||||
31 | 6 | 10,500 | 44,195 |
Table (3)
Account: Accounts ReceivableAccount no.12 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 3,400 | |||
5 | 5 | 2,450 | 950 | ||||
15 | 5 | 9,180 | 10,130 | ||||
21 | 6 | 4,820 | 14,950 | ||||
27 | 6 | 9,520 | 5,430 | ||||
31 | 6 | 2,650 | 8,080 |
Table (4)
Account: SuppliesAccount no.14 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 1,350 | |||
20 | 6 | 735 | 2,085 | ||||
30 | Adjusting | 7 | 1,350 | 715 |
Table (5)
Account: Prepaid RentAccount no.15 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 3,200 | |||
31 | Adjusting | 7 | 1,600 | 1,600 |
Table (6)
Account: Prepaid InsuranceAccount no.16 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 1,500 | |||
31 | Adjusting | 7 | 275 | 1,225 |
Table (7)
Account: Office equipmentAccount no.18 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 14,500 | |||
Table (8)
Account: Accumulated Depreciation-Office equipmentAccount no.19 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 330 | |||
31 | Adjusting | 7 | 330 | 660 |
Table (9)
Account: Accounts Payable Account no.21 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 800 | |||
13 | 5 | 640 | 160 | ||||
20 | 6 | 735 | 895 |
Table (10)
Account: Salaries Payable Account no.22 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 120 | |||
16 | 5 | 120 | |||||
31 | Adjusting | 7 | 325 | 325 |
Table (11)
Account: Unearned Fees Account no.23 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 2,500 | |||
3 | 5 | 4,500 | 7,000 | ||||
31 | Adjusting | 7 | 3,790 | 3,210 |
Table (12)
Account: Common StockAccount no.31 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 30,000 | |||
Table (13)
Account: Retained EarningsAccount no.32 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 1 | Balance | ✓ | 12,300 | |||
31 | Closing | 8 | 33,425 | 45,725 | |||
31 | Closing | 8 | 10,500 | 35,225 |
Table (14)
Account: DividendsAccount no.33 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | 6 | 10,500 | 10,500 | |||
31 | Closing | 8 | 10,500 |
Table (15)
Account: Income SummaryAccount no.34 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | Closing | 8 | 40,000 | 40,000 | ||
31 | Closing | 8 | 6,575 | 33,425 | |||
31 | Closing | 8 | 33,425 |
Table (16)
Account: Fees earned Account no.41 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 15 | 5 | 9,180 | 9,180 | |||
17 | 5 | 8,360 | 17,540 | ||||
21 | 6 | 4,820 | 22,360 | ||||
25 | 6 | 7,900 | 30,260 | ||||
31 | 6 | 3,300 | 33,560 | ||||
31 | 6 | 2,650 | 36,210 | ||||
31 | Adjusting | 7 | 3,790 | 40,000 | |||
31 | Closing | 8 | 40,000 |
Table (17)
Account: Salary expense Account no.51 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 16 | 5 | 630 | 630 | |||
28 | 6 | 750 | 1,380 | ||||
31 | Adjusting | 7 | 325 | 1,705 | |||
31 | Closing | 8 | 1,705 |
Table (18)
Account: Rent expense Account no.52 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | Adjusting | 7 | 1,600 | 1,600 | ||
31 | Closing | 8 | 1,600 |
Table (19)
Account: Supplies expense Account no.53 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | Adjusting | 7 | 1,370 | 1,370 | ||
31 | Closing | 8 | 1,370 |
Table (20)
Account: Depreciation expense Account no.54 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | Adjusting | 7 | 330 | 330 | ||
31 | Closing | 8 | 330 |
Table (21)
Account: Insurance expense Account no.54 | |||||||
Date | Item | PostRef. |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 31 | Adjusting | 7 | 275 | 275 | ||
31 | Closing | 8 | 275 |
Table (22)
Account: Miscellaneous expense Account no.59 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
May | 9 | 5 | 225 | 225 | |||
30 | 6 | 260 | 485 | ||||
31 | 6 | 810 | 1,295 | ||||
31 | Closing | 8 | 1,295 |
Table (23)
(3)
To prepare: The unadjusted trial balance of Consulting Kat May, 31.
Explanation of Solution
Prepare an unadjusted trial balance of Consulting K for the month ended May, 31 as follows:
K Consulting Unadjusted Trial Balance May 31, 2018 |
|||
Particulars |
Account No. |
Debit $ | Credit $ |
Cash | 11 | 44,195 | |
Accounts receivable | 12 | 8,080 | |
Supplies | 14 | 2,085 | |
Prepaid rent | 15 | 3,200 | |
Prepaid insurance | 16 | 1,500 | |
Office Equipment | 18 | 14,500 | |
Accumulated depreciation-Office equipment | 19 | 330 | |
Accounts payable | 21 | 895 | |
Salaries payable | 22 | 0 | |
Unearned fees | 23 | 7,000 | |
Common stock | 31 | 30,000 | |
Retained earnings | 32 | 12,300 | |
Dividends | 33 | 10,500 | |
Fees earned | 41 | 36,210 | |
Salary expense | 51 | 1,380 | |
Rent expense | 52 | 0 | |
Supplies expense | 53 | 0 | |
Depreciation expense | 54 | 0 | |
Insurance expense | 55 | 0 | |
Miscellaneous expense | 59 | 1,295 | |
Total | 86,735 | 86,735 |
Table (22)
(5)
To enter: The unadjusted trial balance on an end-of-period spreadsheet.
Explanation of Solution
The unadjusted trial balance on an end-of-period spreadsheet is prepared as follows:
Table (23)
Hence, the unadjusted trial balance on an end-of-period spreadsheet is prepared and completed.
(6)
To Journalize: Theadjusting entries of Consulting K for May 31.
Explanation of Solution
The adjusting entries of ConsultingK for May 31, 2018are as follows:
Date | Accounts title and explanation | Post Ref. |
Debit ($) |
Credit ($) |
|
2018 | Insurance expense | 55 | 275 | ||
May | 31 | Prepaid insurance | 16 | 275 | |
(To record the insurance expense for May ) | |||||
31 | Supplies expense(1) | 53 | 1,370 | ||
Supplies | 14 | 1,370 | |||
(To record the supplies expense) | |||||
31 | Depreciation expense | 54 | 330 | ||
Accumulated Depreciation | 19 | 330 | |||
(To record the depreciation and the accumulated depreciation) | |||||
31 | Salaries expense | 51 | 325 | ||
Salaries payable | 22 | 325 | |||
(To record the accrued salaries payable) | |||||
31 | Rent expense | 52 | 1,600 | ||
Prepaid rent | 15 | 1,600 | |||
(To record the rent expense for May ) | |||||
31 | Unearned fees(2) | 23 | 3,790 | ||
Fees earned | 41 | 3,790 | |||
(To record the receipt of unearned fees) |
Table (24)
Working notes:
(7)
To prepare: An adjusted trial balance of Consulting K for May 31, 2018.
Explanation of Solution
An adjusted trial balanceof Consulting K for May 31, 2018 is prepared as follows:
K Consulting Adjusted Trial Balance May 31, 2018 |
|||
Particulars |
Account No. |
Debit $ | Credit $ |
Cash | 11 | 44,195 | |
Accounts receivable | 12 | 8,080 | |
Supplies | 14 | 715 | |
Prepaid insurance | 16 | 1,600 | |
Prepaid rent | 15 | 1,225 | |
Office Equipment | 18 | 14,500 | |
Accumulated Depreciation-Office equipment | 19 | 660 | |
Accounts payable | 21 | 895 | |
Salaries payable | 22 | 325 | |
Unearned fees | 23 | 3,210 | |
Common stock | 31 | 30,000 | |
Retained earnings | 32 | 12,300 | |
Dividends | 33 | 10,500 | |
Fees earned | 41 | 40,000 | |
Salary expense | 51 | 1,705 | |
Rent expense | 52 | 1,600 | |
Supplies Expense | 53 | 1,370 | |
Depreciation expense | 54 | 330 | |
Insurance expense | 55 | 275 | |
Miscellaneous expense | 59 | 1,295 | |
Total | 87,390 | 87,390 |
Table (25)
(8)
To Prepare: An income statement for the year ended May 31, 2018.
Explanation of Solution
An income statement for the year ended May 31, 2018 is as follows:
K Consulting | ||
Income Statement | ||
For the year ended May 31, 2018 | ||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Fees Earned | 40,000 | |
Expenses: | ||
Salaries Expense | 1,705 | |
Rent Expense | 1,600 | |
Supplies Expense | 1,370 | |
Depreciation Expense- Building | 330 | |
Insurance Expense | 275 | |
Miscellaneous Expense | 1,295 | |
Total Expenses | 6,575 | |
Net Income | $33,425 |
Table (26)
Hence, the net income of K Consultingfor the year ended May 31, 2018is $33,425.
(9)
To Journalize: The closing entries for KConsulting.
Explanation of Solution
Closing entry for revenue and expense accounts:
Date | Accounts title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
May 31, 2018 | Fees earned | 41 | 40,000 | |
Income summary | 34 | 40,000 | ||
(To close the balances of revenue account) | ||||
May 31, 2018 | Income summary | 34 | 6,575 | |
Salary expense | 51 | 1,705 | ||
Rent Expense | 52 | 1,600 | ||
Supplies Expense | 53 | 1,370 | ||
Depreciation Expense | 54 | 330 | ||
Insurance Expense | 55 | 275 | ||
Miscellaneous Expense | 59 | 1,295 | ||
(To close the balances of expense account) | ||||
May 31, 2018 | Income summary | 34 | 33,425 | |
Retained earnings | 32 | 33,425 | ||
(To Close the excess of revenue to expenses) | ||||
May 31, 2018 | Retained earnings | 32 | 10,500 | |
Dividends | 33 | 10,500 | ||
(To close the dividend account to retained earnings account) |
Table (4)
- Fees earned are revenue account. Since the amount of revenue is closed and transferred to Income summary account. Here, FI Services earned an income of $40,000. Therefore, it is debited.
- Wages Expense, Rent Expense, Insurance Expense, Utilities Expense, supplies Expense, Depreciation Expense, and Miscellaneous Expense are expense accounts. Since the amount of expenses are closed to Income Summary account. Therefore, it is credited.
- Closing entries are also passed in order to close the excess of revenue over the expenses, and the dividend account.
(10)
To Journalize: The closing entries for KConsulting.
Explanation of Solution
Prepare apost–closing trial balance of KConsulting for the month ended May 31, 2018 as follows:
Consulting K Post-closing Trial Balance May, 31, 2018 |
|||
Particulars | Account Number | Debit $ | Credit $ |
Cash | 11 | 44,195 | |
Accounts receivable | 12 | 8,080 | |
Supplies | 14 | 715 | |
Prepaid rent | 15 | 1,600 | |
Prepaid insurance | 16 | 1,225 | |
Office Equipment | 18 | 14,500 | |
Accumulated depreciation –Office Equipment | 19 | 660 | |
Accounts payable | 21 | 895 | |
Salaries payable | 22 | 325 | |
Unearned rent | 23 | 3,210 | |
Common stock | 31 | 30,000 | |
Retained earnings | 32 | 35,225 | |
Total | 70,315 | 70,315 |
Table (5)
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- Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2019. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement, 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Provided services on account for the period May 115, 9,180. 16. Paid part-time receptionist for two weeks' salary including the amount owed on April 30, 750. 17. Received cash from cash clients for fees earned during the period May 116, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Provided services on account for the period May 1620, 4,820. 25. Received cash from cash clients for fees earned for the period May 1723, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks' salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Received cash from cash clients for fees earned for the period May 2631, 3,300. 31. Provided services on account for the remainder of May, 2,650. 31. Kelly withdrew 10,500 for personal use. Instructions 1.The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2019, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2019, and place a check mark () in the Posting Reference column Journalize each of the May transactions in a two column Journal starting on Page 5 of the journal and using Kelly Consulting's chart of accounts. (Do not insert the account numbers in the journal at this time.) 2.Post the journal to a ledger of four-column accounts. 3Prepare an unadjusted trial balance. 4.At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a.Insurance expired during May is 275. b.Supplies on hand on May 3 1 are 715. c.Depreciation of office equipment for May is 330. d.Accrued receptionist salary on May 31 is 325. e.Rent expired during May is 1,600. f.Unearned fees on May 31 are 3,210. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owner's equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forwardOn October 1, 2019, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business, 18,000. 4.Paid rent for period of October 4 to end of month, 3,000. 10.Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13.Purchased equipment on account, 10,500. 14.Purchased supplies for cash, 2,100. 15.Paid annual premiums on property and casualty insurance, 3,600. 15.Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21.Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24.Recorded jobs completed on account and sent invoices to customers, 14,150. 26.Received an invoice for truck expenses, to be paid in November, 700. 27.Paid utilities expense, 2,240. 27.Paid miscellaneous expenses, 1,100. Oct. 29. Received cash from customers on account, 7,600. 30.Paid wages of employees, 4,800. 31.Withdrew cash for personal use, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 2019. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- Journal entries and trial balance On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month: a. Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 40,000. b. Paid rent on office and equipment for the month, 4,800. c. Purchased supplies on account, 2,150. d. Paid creditor on account, 1,100. e. Earned sales commissions, receiving cash, 18,750. f. Paid automobile expenses (including rental charge) for month, 1,580, and miscellaneous expenses, 800. g. Paid office salaries, 3,500. h. Determined that the cost of supplies used was 1,300. i. Paid dividends, 1,500. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of October 31, 20Y6. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for October. 5. Determine the increase or decrease in retained earnings for October.arrow_forwardJournal entries and trial balance On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month: a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 17,500. b. Purchased supplies on account, 2,300. c. Earned sales commissions, receiving cash, 13,300. d. Paid rent on office and equipment for the month, 3,000. e. Paid creditor on account, 1,150. f. Paid dividends, 1,800. g. Paid automobile expenses (including rental charge) for month, 1,500, and miscellaneous expenses, 400. h. Paid office salaries, 2,800. i. Determined that the cost of supplies used was 1,050. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Journal entry explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of August 31, 20Y7. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for August. 5. Determine the increase or decrease in retained earnings for August.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forward
- The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2.Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3.Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4.Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardP. Schwartz, Attorney at Law, opened his office on October 1. The account headings are presented below. Transactions completed during the month follow. a. Schwartz deposited 25,000 in a bank account in the name of the business. b. Bought office equipment on account from QuipCo, 9,670. c. Schwartz invested his personal law library, which cost 2,800. d. Paid the office rent for the month, 1,700, Ck. No. 2000. e. Bought office supplies for cash, 418, Ck. No. 2001. f. Bought insurance for two years, 944, Ck. No. 2002. g. Sold legal services for cash, 8,518. h. Paid the salary of the part-time receptionist, 1,820, Ck. No. 2003. i. Received and paid the telephone bill, 388, Ck. No. 2004. j. Received and paid the bill for utilities, 368, Ck. No. 2005. k. Sold legal services for cash, 9,260. l. Paid on account to QuipCo, 2,670, Ck. No. 2006. m. Schwartz withdrew cash for personal use, 2,500, Ck. No. 2007. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6) a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forwardIn October, A. Nguyen established an apartment rental service. The account headings are presented below. Transactions completed during the month of October follow. a. Nguyen deposited 25,000 in a bank account in the name of the business. b. Paid the rent for the month, 1,200, Ck. No. 2015. c. Bought supplies on account, 225. d. Bought a truck for 18,000, paying 1,000 in cash and placing the remainder on account e. Bought Insurance for the truck for the yean 1,400, Ck. No. 2016. f. Sold services on account 5,000. g. Bought office equipment on account from Henry Office Supply, 2,300. h. Sold services for cash for the first half of the month, 6,050. i. Received and paid the bill for utilities, 150, Ck. No. 2017. j. Received a bill for gas and oil for the truck. 80. k. Paid wages to the employees, 1,400, Ck Nos. 20182020. l. Sold services for cash for the remainder of the month, 4,200. m. Nguyen withdrew cash for personal use, 2,000, Ck. No. 2021. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, reanalyze each transaction.arrow_forwardConsidering the following events, determine which month the revenue or expenses would be recorded using the accounting method specified. a. Gerber Company uses the cash basis of accounting. Gerber prepays cash in May for insurance that only covers the following month, (June). b. Matthews and Dudley Attorneys uses the accrual basis of accounting. Matthews and Dudley Attorneys receives cash from customers in June for services to be performed in July. c. Eckstein Company uses the accrual basis of accounting. Eckstein prepays cash in October for rent that covers the following month, (October). d. Gerbino Company uses the cash basis of accounting. Gerbino makes a sale to a customer in February but does not expect payment until March.arrow_forward
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