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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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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:

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. 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, 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 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 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. (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.

(1)

To determine

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:

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 end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.

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.

Netincome = Total revenues – Total expenses

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

Journalize the transactions of May in a two column journal beginning on page 5.

                                                   Journal                                           Page 5
Date Description Post. Ref Debit ($) Credit ($)
2016 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...

(2), (6) and (9)

To determine

To record: The balance of each accounts in the appropriate balance column of a four-column account and post them to the ledger.

(3)

To determine

To prepare: The unadjusted trial balance of Consulting K at May, 31.

(5)

To determine

To enter: The unadjusted trial balance on an end-of-period spreadsheet.

(6)

To determine

To Journalize: The adjusting entries of Consulting K for May 31.

(7)

To determine

To prepare: An adjusted trial balance of Consulting K for May 31, 2016.

(8)

To determine

To Prepare: An income statement for the year ended May 31, 2016.

(9)

To determine

To Journalize: The closing entries for K Consulting.

(10)

To determine

To Journalize: The closing entries for K Consulting.

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