Reference no: EM132944100
Adjusting the Accounts - Three Parts
Part A
It has been one month since you first open your business. Your parents are curious about your success and would like to know if your business has been profitable. You do not have an answer as you have not made any adjustments.
You gather the following information:
An inventory count reveals that $135 of supplies were used.
You estimate that all the baking equipment purchased ($1,500) will have a useful life of 5 years or 60 months. (you decided to record a full month's worth of depreciation, regardless of when the equipment was obtained for the business)
Your parents decide to charge interest of 6% on the note payable extended on November 16. The loan plus interest is to be repaid in 24 months. (assume that ½ of interest accrued in November). On November 30, a friend asks you to host a party at her office for about 30 employees. You create an invoice for $350 and give it to her. She informs you that she will submit it for payment, and it will be paid at some point in December.
You receive a $50 cellphone bill (use the Communications expense account to record) for the usage by the business in November. The bill is due December 15.
Required for part A:
1. Prepare and post adjusting journal entries for November.
2. Prepare adjusted trial balance on November 30, 2020.
3. Prepare an income statement, retained earnings statement and balance sheet
NOTE: Make sure to continue with what you started in November (mastery level 1). Below is the trial balance from November to help you.
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Account Title
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Debit
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Credit
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Cash
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790
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supplies
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495
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equipment
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1850
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prepaid insurance
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1380
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Unearned Revenue
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40
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Notes payable'
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3200
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accounts payable
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130
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Owner's Capital
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1150
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service revenue
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125
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Utilities
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130
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Total
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4645
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4645
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Part B.
You are gearing up for the winter holiday season. During the month of December 2020, the following transactions occur.
Dec. 1 You hire an assistant at an hourly wage of $13 to help with baking and some administrative duties.
5 You hold the party that was booked on November 25. The balance outstanding is received.
8 You receive a check for the amount due from your friend's party held on November 30.
9 You receive $800 in advance from the local school board for 5 parties that they will hold during December and January.
10 Pay the utilities invoice outstanding from November 23.
15 Pay the cell phone invoice outstanding from November 30.
16 Issue a check to your brother for $960 for the design of the website.
19 Receive a deposit of $50 on a party scheduled for early January.
20 Additional revenue during the month for parties amounts to $4,500. (You have not had time to account for each party individually.) $3,000 in cash has been collected and $1,500 is still outstanding. (This is in addition to the December 5 and December 9 transactions.)
23 Additional baking supplies purchased during the month that include sugar, flour, butter, and eggs amount to $1,200 cash.
23 Issue a check to your assistant for $1,560. Your assistant worked approximately 120 hours from the time in which she was hired until December 23.
28 You pay yourself $600 from the company's profit.
Required for part B:
1. Journalize the transactions.
2. Post the December transactions to the general ledger accounts.
3. Prepare trial balance for December.
NOTE: You must use the ending balances of the permanent accounts from November as the beginning balances of your ledger accounts. If you Owner's Capital, you must add the income from November to it.
Part C.
As of December 31, year-end, the following adjusting entry data are provided.
1. A count reveals that $45 of brochures and posters were used.
2. Depreciation is recorded on the baking equipment purchased in November. The baking equipment has a useful life of 5 years.
3. Amortization (which is like depreciation) is recorded on the website. (Credit the Website account directly for the amortization amount.) The website is amortized over a useful life of 2 years and was available for use on December 1.
4. Interest on the note payable is accrued. Round to nearest dollar.
5. One month's worth of insurance has expired.
6. You are unexpectedly telephoned on December 28 to hold a party at the neighborhood community center on December 31. In early January you send an invoice for $650 to the community center.
7. A count reveals that $1,125 of baking supplies were used.
8. A cell phone invoice is received for $75. The invoice is for services provided during the month of December and is due on January 15.
9. Because the party occurred unexpectedly on December 31 and is for such a large group of children, your assistant helps. Your assistant worked 7 hours at a rate of $13 per hour.
10. An analysis of the unearned revenue account reveals that two of the five parties paid for by the local school board on December 9 still have not been held by the end of December. The $50 deposit received on December 19 for another party also remains unearned.
The month of December was very busy for you. At the end of the month, after journalizing and posting the transactions for December and making the adjusting entries, you must prepare the adjusted trial balance.
Required for part C:
1. Prepare and post adjusting journal entries for December.
2. Prepare adjusted trial balance at December 31, 2020.
3. Prepare the Income statement, Statement of Owner's Equity, and Balance Sheet
4. Prepare and closing entries as of December 31, 2020
5. Prepare a post-closing trial balance
Attachment:- Adjusting the Accounts.rar