Reference no: EM132998581
Question - John operates John Inc. which has been offering catering services since January 1, 2018. The fiscal year ends on December 31. As of January 1, 2019, the trial balance looked as follows:
Name of accounts Balance $
Cash 10,000
Clients 8,000
Stock of supplies 6,000
Transportation equipment 12,000
Accumulated depreciation - Transportation equipment 2,000
Building 18,000
Accumulated depreciation - Building 1,000
Suppliers 13,000
Share capital (15,000 shares) 30,000
Profits not distributed 8,000
The following transactions took place during the 2019 financial year
a) Signing of a note payable of $ 40,000 payable within one year at an annual interest rate of 10%, dated July 1, 2019.
b) Cash purchase of equipment valued at $ 36,000 on July 1, 2019.
c) Cash issue of 5,000 additional shares at a cost of $ 2 per share.
d) Provision of catering services to various parties for $ 120,000 including $ 18,000 on credit.
e) October 1, 2019, cash payment of $ 2,400 for an insurance premium covering the period between October 1, 2019 and September 30, 2020.
f) Credit purchase of additional supplies for $ 26,000.
g) Receipt of accounts receivable: $ 16,000.
h) Payment of accounts payable: $ 22,000.
i) Payment of salaries for $ 32,000.
j) Receipt of a deposit of $ 6,000 for services to be rendered on January 15, 2020.
k) Declaration and payment of dividends: $ 20,000.
The data concerning the adjustment postings are as follows: l) The year-end inventory (as of December 31) shows that the value of the inventory of supplies on hand as of December 31, 2019 is $ 8,000.
m) Equipment - useful life 4 years, residual value $ 4,000.
n) Transportation equipment - useful life 5 years, residual value $ 2,000.
o) Building - useful life 18 years, value zero residual.
p) Salaries earned since December 24, but not yet paid; $ 6,000. They will be paid in January 2020.
q) Income tax expense of $ 8,000 payable in February 2020.
Required -
1. Make the journal entries to record transactions a) to k) and post them in the accounts at T*;
2. Draw up a trial balance before adjustments;
3. Make the adjustment entries and post them in the T * accounts for the year ended December 31, 2019;
4. Make a statement of comprehensive income for the 2019 financial year.