Reference no: EM133073240
Question - Sisters Ltd began operation on 1 April 2021. The trial balance at 30 June is as below.
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Sisters Ltd Partial trial balance As at 30 June 2021
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Account Name
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Debit ($)
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Credit ($)
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Cash
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18,960
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Account receivables
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8,500
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Allowance for doubtful debts
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1,000
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Prepaid insurance
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5,040
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Supplies
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4,700
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Office equipment
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45,000
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Account payable
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3,100
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Service revenue received in advance
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3,000
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Share capital
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40,000
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Service revenue
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50,990
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Salaries expense
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6,590
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Rent expense
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10,500
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Additional information:
1. Invoices representing $2,500 of service performed during the month have not been recorded as of 30 June.
2. Supplies on hand at 30 June total $1,220.
3. Services were performed during the period in relation to $2,000 of revenue received in advance.
4. The insurance policy is for a year, commencing 1 April 2021.
5. The ageing schedule of Sisters Ltd indicates that $1,100 of accounts receivables will be uncollectable.
6. The office equipment has an 5-year life with no residual value. Sisters Ltd uses straight-line method to record depreciation.
Required -
1) Prepare the adjusting entries for the month of June.
2) What is the carrying amount of office equipment after adjustments?
3) In July, a $800 account receivable is written off as uncollectable. Prepare the journal entry to record the write-off.
4) In July, $2,050 cash dividend is paid. Prepare the journal entry to record the dividend payment.
5) Discuss the statement "A company must have made sufficient profits before it can pay dividends to its shareholders."