July 1. The following assets were received from Steffy Lopez: cash, $13,500; accounts receivable, $20,800; supplies, $3,200; and office equipment, $7,500. There were no liabilities received.
1. Paid two months’ rent on a lease rental contract, $4,800.
2. Paid the premiums on property and casualty insurance policies, $4,500.
4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $5,500.
5. Purchased additional office equipment on account from Office Station Co., $6,500.
6. Received cash from clients on account, $15,300.
10. Paid cash for a newspaper advertisement, $400.
12. Paid Office Station Co. for part of the debt incurred on July 5, $5,200.
12. Recorded services provided on account for the period July 1–12, $13,300.
14. Paid receptionist for two weeks’ salary, $1,750.
Record the following transactions on Page 2 of the journal.
17. Recorded cash from cash clients for fees earned during the period July 1–17, $9,450.
18. Paid cash for supplies, $600.
20. Recorded services provided on account for the period July 13–20, $6,650.
24. Recorded cash from cash clients for fees earned for the period July 17–24, $4,000.
26. Received cash from clients on account, $12,000.
27. Paid receptionist for two weeks’ salary, $1,750.
29. Paid telephone bill for July, $325.
31. Paid electricity bill for July, $675.
31. Recorded cash from cash clients for fees earned for the period July 25–31, $5,200.
July 31. Recorded services provided on account for the remainder of July, $3,000.
31. Steffy withdrew $12,500 for personal use.
Instructions
1. Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited.
(Do not insert the account numbers in the journal at this time.)
11 Cash 31 Steffy Lopez, Capital
12 Accounts Receivable 32 Steffy Lopez, Drawing
14 Supplies 41 Fees Earned
15 Prepaid Rent 51 Salary Expense
16 Prepaid Insurance 52 Rent Expense
18 Office Equipment 53 Supplies Expense
19 Accumulated Depreciation 54 Depreciation Expense
21 Accounts Payable 55 Insurance Expense
22 Salaries Payable 59 Miscellaneous Expense
23 Unearned Fees
2. Post the journal to a ledger of four-column accounts.
3. Prepare an unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
a. Insurance expired during July is $375.
b. Supplies on hand on July 31 are $1,525.
c. Depreciation of office equipment for July is $750.
d. Accrued receptionist salary on July 31 is $175.
e. Rent expired during July is $2,400.
f. Unearned fees on July 31 are $2,750.
5. (Optional.) Enter the unadjusted trial balance on an end-of-period spreadsheet (work sheet) and complete the spreadsheet.
6. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 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. (Income Summary is account #33 in the chart of accounts.) Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry.
10. Prepare a post-closing trial balance.
Answer:
1. and 2.
JOURNAL Page 1
Date
Post.
Ref. Debit Credit
2014
July 1 Cash 11 13,500
Accounts Receivable 12 20,800
Supplies 14 3,200
Office Equipment 18 7,500
Steffy Lopez, Capital 31 45,000
1 Prepaid Rent 15 4,800
Cash 11 4,800
2 Prepaid Insurance 16 4,500
Cash 11 4,500
4 Cash 11 5,500
Unearned Fees 23 5,500
5 Office Equipment 18 6,500
Accounts Payable 21 6,500
6 Cash 11 15,300
Accounts Receivable 12 15,300
10 Miscellaneous Expense 59 400
Cash 11 400
12 Accounts Payable 21 5,200
Cash 11 5,200
12 Accounts Receivable 12 13,300
Fees Earned 41 13,300
14 Salary Expense 51 1,750
Cash 11 1,750
JOURNAL Page 2
Date
Post.
Ref. Debit Credit
2014
July 17 Cash 11 9,450
Fees Earned 41 9,450
18 Supplies 14 600
Cash 11 600
20 Accounts Receivable 12 6,650
Fees Earned 41 6,650
24 Cash 11 4,000
Fees Earned 41 4,000
26 Cash 11 12,000
Accounts Receivable 12 12,000
27 Salary Expense 51 1,750
Cash 11 1,750
29 Miscellaneous Expense 59 325
Cash 11 325
31 Miscellaneous Expense 59 675
Cash 11 675
31 Cash 11 5,200
Fees Earned 41 5,200
31 Accounts Receivable 12 3,000
Fees Earned 41 3,000
31 Steffy Lopez, Drawing 32 12,500
Cash 11 12,500
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 13,500 13,500
1 1 4,800 8,700
2 1 4,500 4,200
4 1 5,500 9,700
6 1 15,300 25,000
10 1 400 24,600
12 1 5,200 19,400
14 1 1,750 17,650
17 2 9,450 27,100
18 2 600 26,500
24 2 4,000 30,500
26 2 12,000 42,500
27 2 1,750 40,750
29 2 325 40,425
31 2 675 39,750
31 2 5,200 44,950
31 2 12,500 32,450
2., 6., and 9.
Account:
Account:
Cash
Accounts Receivable
Account No. 11
Account No. 12
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 20,800 20,800
6 1 15,300 5,500
12 1 13,300 18,800
20 2 6,650 25,450
26 2 12,000 13,450
31 2 3,000 16,450
Account: Supplies Account No. 14
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 3,200 3,200
18 2 600 3,800
31 Adjusting 3 2,275 1,525
Account: Prepaid Rent Account No. 15
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 4,800 4,800
31 Adjusting 3 2,400 2,400
Account: Prepaid Insurance Account No. 16
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 2 1 4,500 4,500
31 Adjusting 3 375 4,125
Account: Office Equipment Account No. 18
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 7,500 7,500
5 1 6,500 14,000
Account: Accumulated Depreciation Account No. 19
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 750 750
Account: Accounts Payable Account No. 21
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 5 1 6,500 6,500
12 1 5,200 1,300
Account: Salaries Payable Account No. 22
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 175 175
Account: Unearned Fees Account No. 23
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 4 1 5,500 5,500
31 Adjusting 3 2,750 2,750
Account: Steffy Lopez, Capital Account No. 31
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 1 1 45,000 45,000
31 Closing 4 33,475 78,475
31 Closing 4 12,500 65,975
Account: Steffy Lopez, Drawing Account No. 32
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 2 12,500 12,500
31 Closing 4 12,500 — —
Account: Income Summary Account No. 33
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Closing 4 44,350 44,350
31 Closing 4 10,875 33,475
31 Closing 4 33,475 — —
Account: Fees Earned Account No. 41
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 12 1 13,300 13,300
17 2 9,450 22,750
20 2 6,650 29,400
24 2 4,000 33,400
31 2 5,200 38,600
31 2 3,000 41,600
31 Adjusting 3 2,750 44,350
31 Closing 4 44,350 — —
Account: Salary Expense Account No. 51
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 14 1 1,750 1,750
27 2 1,750 3,500
31 Adjusting 3 175 3,675
31 Closing 4 3,675 — —
Account: Rent Expense Account No. 52
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 2,400 2,400
31 Closing 4 2,400 — —
Account: Supplies Expense Account No. 53
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 2,275 2,275
31 Closing 4 2,275 — —
Account: Depreciation Expense Account No. 54
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 750 750
31 Closing 4 750 — —
Account: Insurance Expense Account No. 55
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 31 Adjusting 3 375 375
31 Closing 4 375 — —
Account: Miscellaneous Expense Account No. 59
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
July 10 1 400 400
29 2 325 725
31 2 675 1,400
31 Closing 4 1,400 — —
3.
DIAMOND CONSULTING
Unadjusted Trial Balance
July 31, 2014
Debit
Balances
Credit
Balances
Cash 32,450
Accounts Receivable 16,450
Supplies 3,800
Prepaid Rent 4,800
Prepaid Insurance 4,500
Office Equipment 14,000
Accumulated Depreciation 0
Accounts Payable 1,300
Salaries Payable 0
Unearned Fees 5,500
Steffy Lopez, Capital 45,000
Steffy Lopez, Drawing 12,500
Fees Earned 41,600
Salary Expense 3,500
Rent Expense 0
Supplies Expense 0
Depreciation Expense 0
Insurance Expense 0
Miscellaneous Expense 1,400
93,400 93,400
5. Optional (Appendix)
DIAMOND CONSULTING
End-of-Period Spreadsheet (Work Sheet)
For the Month Ended July 31, 2014
Account Title
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 32,450 32,450 32,450
Accounts Receivable 16,450 16,450 16,450
Supplies 3,800 (b) 2,275 1,525 1,525
Prepaid Rent 4,800 (e) 2,400 2,400 2,400
Prepaid Insurance 4,500 (a) 375 4,125 4,125
Office Equipment 14,000 14,000 14,000
Accum. Depreciation (c) 750 750 750
Accounts Payable 1,300 1,300 1,300
Salaries Payable (d) 175 175 175
Unearned Fees 5,500 (f) 2,750 2,750 2,750
Steffy Lopez, Capital 45,000 45,000 45,000
Steffy Lopez, Drawing 12,500 12,500 12,500
Fees Earned 41,600 (f) 2,750 44,350 44,350
Salary Expense 3,500 (d) 175 3,675 3,675
Rent Expense (e) 2,400 2,400 2,400
Supplies Expense (b) 2,275 2,275 2,275
Depreciation Expense (c) 750 750 750
Insurance Expense (a) 375 375 375
Miscellaneous Expense 1,400 1,400 1,400
93,400 93,400 8,725 8,725 94,325 94,325 10,875 44,350 83,450 49,975
Net income 33,475 33,475
44,350 44,350 83,450 83,450
6. JOURNAL Page 3
Date
Post.
Ref. Debit Credit
2014 Adjusting Entries
July 31 Insurance Expense 55 375
Prepaid Insurance 16 375
Insurance expired.
31 Supplies Expense 53 2,275
Supplies 14 2,275
Supplies used ($3,800 – $1,525).
31 Depreciation Expense 54 750
Accumulated Depreciation 19 750
Equipment depreciation.
31 Salary Expense 51 175
Salaries Payable 22 175
Accrued salaries.
31 Rent Expense 52 2,400
Prepaid Rent 15 2,400
Rent expired.
31 Unearned Fees 23 2,750
Fees Earned 41 2,750
Unearned fees earned
($5,500 – $2,750).
7.
DIAMOND CONSULTING
Adjusted Trial Balance
July 31, 2014
Debit
Balances
Credit
Balances
Cash 32,450
Accounts Receivable 16,450
Supplies 1,525
Prepaid Rent 2,400
Prepaid Insurance 4,125
Office Equipment 14,000
Accumulated Depreciation 750
Accounts Payable 1,300
Salaries Payable 175
Unearned Fees 2,750
Steffy Lopez, Capital 45,000
Steffy Lopez, Drawing 12,500
Fees Earned 44,350
Salary Expense 3,675
Rent Expense 2,400
Supplies Expense 2,275
Depreciation Expense 750
Insurance Expense 375
Miscellaneous Expense 1,400
94,325 94,325
8. DIAMOND CONSULTING
Income Statement
For the Month Ended July 31, 2014
Fees earned $44,350
Expenses:
Salary expense $3,675
Rent expense 2,400
Supplies expense 2,275
Depreciation expense 750
Insurance Expense 375
Miscellaneous expense 1,400
Total expenses 10,875
Net income $33,475
DIAMOND CONSULTING
Statement of Owner’s Equity
For the Month Ended July 31, 2014
Steffy Lopez, capital, July 1, 2014 $ 0
Investments during month $45,000
Net income 33,475
$78,475
Less withdrawals 12,500
Increase in owner’s equity 65,975
Steffy Lopez, capital, July 31, 2014 $65,975
DIAMOND CONSULTING
Balance Sheet
July 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $32,450 Accounts payable $1,300
Accounts receivable 16,450 Salaries payable 175
Supplies 1,525 Unearned fees 2,750
Prepaid rent 2,400 Total liabilities $ 4,225
Prepaid insurance 4,125
Total current assets $56,950
Property, plant, and equipment:
Office equipment $14,000 Owner’s Equity
Less accum. depreciation 750 Steffy Lopez, capital 65,975
Total property, plant, and
equipment 13,250 Total liabilities and owner’s
Total assets $70,200 equity $70,200
9. JOURNAL Page 4
Date
Post.
Ref. Debit Credit
2014 Closing Entries
July 31 Fees Earned 41 44,350
Income Summary 33 44,350
31 Income Summary 33 10,875
Salary Expense 51 3,675
Rent Expense 52 2,400
Supplies Expense 53 2,275
Depreciation Expense 54 750
Insurance Expense 55 375
Miscellaneous Expense 59 1,400
31 Income Summary 33 33,475
Steffy Lopez, Capital 31 33,475
31 Steffy Lopez, Capital 31 78,475
Steffy Lopez, Drawing 32 78,475
10.
DIAMOND CONSULTING
Post-Closing Trial Balance
July 31, 2014
Debit
Balances
Credit
Balances
Cash 32,450
Accounts Receivable 16,450
Supplies 1,525
Prepaid Rent 2,400
Prepaid Insurance 4,125
Office Equipment 14,000
Accumulated Depreciation 750
Accounts Payable 1,300
Salaries Payable 175
Unearned Fees 2,750
Steffy Lopez, Capital 65,975
70,950 70,950