Question

XYZ Company began operations in May, 2022 by selling common stock to owners in exchange for $90,000 cash. During 2022, ABC Company entered into the following transactions: 1. On May 23, ABC Company purchased inventory for $50,000 cash. 2. On June 1, ABC Company purchased a three-year insurance policy for $32,400 cash. 3. On July 1, ABC Company received $49,000 cash from a customer for services to be performed over the next 8 months. 4. On August 1, ABC Company purchased equipment costing $60,000 by paying $20,000 in cash and agreeing to pay the remainder within six months. The equipment was given a 10-year life and a $4,200 residual value. 5. On August 18, ABC Company sold one-half of the inventory that was purchased on May 23 to a customer for $44,000 cash. Calculate the amount of total assets that ABC Company would report in its December 31, 2022 balance sheet after all the above transactions are recorded and all necessary adjusting entries are made and posted.

Answer 1

prepaid asseto- An item an balance sheel- that is reorded deee to an advance payment yet unconscerned at the end of the accounting period. correxpandingly, an adjusting entry is also neceuary at the end of the accounting period to record usage of such asset, If there is any tirst we need to record the required journal entries for the transactions alove. Date Account name Debit credit me 90,000 may, o cash 90,000 comman stocks may 23 merchandire Anventory 50,000 calls 50000 June 1 prepaid ansurance 32000 cach July 1 couh 49000 44000 creditors (Accounts payble) 60,000 Aug 1 equipment 20,000 caul Accounts payble 40,000

Augis caun 4uDO El sceles 44000 (out of good sold 25000 marchandice miveurely 25000 31 Dec prepaid expenses 6,300 ( 32,400 x 7) pore paud merance 6,300 SS80 Depreciation expense- equipment ( 60,000 - 4,200) 100 5,580 Accumulated de pareciabian - equipment Coreclerosis (Accounts payble)[49000x6) 36,750 36750 Sales following the recording of above entries, let us plot now the Greneral ledger balances of ausent Accounts canh: Date may July amount 90,000 49000 Amoet 50,000 32,400 20,000 Date may 23 june 1 44000 Aug! Augis total 80,600

marchandle mreutory :- Date Amount aurout 50,000 Date Aug is may 23 25000 total 25000 equipment & Date amocut Amout Auga Date 031-Dec 60,000 5,580 toral 54,420 prepald nsurance o Date amount Amount Date Junea 32,400 6,300 31-Dec total 26,100 A4cauxxx receivables total asseats to be The reported are - S0,600 couh marchandice anventory equipment 25000 54,420 prepaid urwance 26,100 tolal alets 1,86, 120