Reference no: EM132671300

WORKSHEET AND FINANCIAL STATEMENTSThe owner invested ?2,000,000 to the business. Entity A started operations on January 1, 20x1. A summary of the transactions during the year is provided below:

Acquired equipment for ?1,000,000 cash.
Obtained a 12%, one-year, bank loan of ?500,000.
Paid one-year insurance amounting to ?160,000 on September 30, 20x1. Entity A uses the "asset method" in recording prepayments.
Total service fees earned amounted to ?6,000,000, one-third of which was on cash basis.
Collected ?1,800,000 accounts receivable.
Total salaries expense paid amounted to ?1,200,000.
Total utilities expense paid amounted ?500,000.
Total supplies purchased on cash basis amounted to ?120,000.
Total owner's drawings amounted to ?1,400,000.

Requirements:

Problem 1: Provide the journal entries for the transactions.

Problem 2: Post the entries to the ledger using T-accounts.

Problem 3: Prepare the unadjusted trial balance using a worksheet.

Problem 4: Prepare the adjusting entries (see additional information below).

Information for adjusting entries:

1. The equipment was acquired on January 1, 20x1 and was estimated to have a useful life of 10 years.
2. The loan was obtained on July 1, 20x1. Principal and interest are due at maturity date.
3. The one-year insurance covers the period October 1, 20x1 to September 30, 20x2.
4. Unused supplies at the end of the year amounted to ?40,000.

Problem 5: Complete the worksheet.

Problem 6: Prepare the closing entries.

Problem 7: Prepare the balance sheet and income statement.