Question

For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 20Y2, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond entered into the following transactions during July:

Jul.	1	The following assets were received from Steffy Lopez in exchange for common stock: cash, $12,500; accounts receivable, $20,800; supplies, $3,200; and office equipment, $7,000. 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, $4,860.
	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, $15,100.
	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, $1,800.

Record the following transactions on Page 2 of the journal:

Jul.	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, $1,800.
	29	Paid telephone bill for July, $350.
	31	Paid electricity bill for July, $675.
	31	Recorded cash from cash clients for fees earned for the period July 25–31, $5,300.
	31	Recorded services provided on account for the remainder of July, $3,000.
	31	Paid dividends, $12,500.

	Required:
1.	Journalize each transaction in a two-column journal starting on Page 1, referring to the chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)
2.	Post the journal to a ledger of four-column accounts. Add the appropriate posting reference to the journal.
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 requirements (5) and (6). A. Insurance expired during July is $405. B. Supplies on hand on July 31 are $1,550. C. Depreciation of office equipment for July is $750. D. Accrued receptionist salary on July 31 is $180. E. Rent expired during July is $2,400. F. Unearned fees earned on July 31, $2,000.
5.	(Optional) On your own paper or spreadsheet, enter the unadjusted trial balance on an end-of-period work sheet and complete the work sheet.
6.	A. Journalize the adjusting entries on page 3 of the journal. Adjusting entries are recorded on July 31. Refer to the Chart of Accounts for exact wording of account titles. B. Post the adjusting entries, inserting balances in the accounts affected.
7.	Prepare an adjusted trial balance.
8.	A. Prepare an income statement for the month ended July 31, 20Y2. Be sure to complete the statement heading. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. You will not need to enter colons (:) on the income statement. B. Prepare a statement of stockholders’ equity for the month ended July 31, 20Y2. Be sure to complete the statement heading. Negative amount should be indicated by the minus sign. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If an amount is zero, enter "0". C. Prepare a balance sheet as of July 31, 20Y2. Be sure to complete the statement heading. Fixed assets must be entered in order according to account number. Refer to the Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. You will not need to enter colons (:) or the word "Less" on the balance sheet; they will automatically insert where necessary. Negative amount should be indicated by the minus sign.
9.	A. Journalize the closing entries on page 4 of the journal. Refer to the Chart of Accounts for exact wording of account titles. B. Post the closing entries, inserting balances in the accounts affected. Leave the ITEM column BLANK for each row. If the account balance is zero (0) after closing entries are posted, enter a zero (0) in the account's normal balance column.
10.	Prepare a post-closing trial balance.

Answer 1

Post Ref Debit Credit Diamond Consulting Journal entries Date Account Page 1 1-Jul Cash Accounts Receivable Supplies Office Equipment Common Stock $ 12,500 $ 20,800 $ 3,200 $ 7,000 $ 43,500 1-Jul $ 4,800 Prepaid Rent Cash $ 4,800 2-Jul $ 4,860 Prepaid Insurance Cash $ 4,860 4-Jul $ 5,500 Cash Unearned Fees $ 5,500 $ 6,500 5-Jul Office Equipment Accounts Payable $ 6,500 6-Jul $ 15,100 Cash Accounts Receivable $ 15,100 $ 400 10-Jul Advertising Expense Cash $ 400 $ 5,200 12-Jul Accounts Payable Cash $ 5,200 $ 13,300 12-Jul Accounts Receivable Fees Earned $ 13,300 $ 1,800 $ 1,800 14-Jul Salaries Expense Cash Page 2 17-Jul Cash Fees Earned $ 9,450 $ 9,450 $ 600 18-Jul Supplies Cash $ 600 $ 6,650 20-Jul Accounts Receivable Fees Earned $ 6,650 $ 4,000 24-Jul Cash Fees Earned $ 4,000 $ 12,000 26-Jul Cash Accounts Receivable $ 12,000 $ 1,800 27-Jul Salaries Expense Cash $ 1,800 29-Jul $ 350 Telephone expense Cash $ 350 31-Jul $ 675 Electricity expense Cash $ 675 $ 5,300 31-Jul Cash Fees Earned $ 5,300 $ 3,000 31-Jul Accounts Receivable Fees Earned $ 3,000 $ 12,500 31-Jul Dividends Cash $ 12,500

Diamond Consulting T Accounts Date Item Balance Credit Balance Credit Credit Debit Date Item Credit Debit Post Ref Debit Cash Post Ref Debit Accounts Receivable $ 12,500 $ 20,800 $ 15,100 $ 4,800 $ 4,850 1-Jul Balance 1-Jul Common Stock 6-Jul Cash 12-Jul Fees Eamed 20-Jul Fees Earned 26-Jul Cash 31-Jul Fees Eamed $ 13,300 $ 6,650 $ $ 20,800 $ 5,700 $ 19,000 $ 25,650 $ 13,650 $ 16,650 J1 $ 5,500 $ 15,100 $ 12,000 $ 3,000 $ 400 $ 5,200 $ 1,800 1-Jul Balance 1-Jul Common Stock 1.Jul Prepaid Rent 2-Jul Prepaid Insurance 4-Jul Unearned Fees 6-Jul Accounts Receivable 10-Jul Advertising Expense 12-Jul Accounts Payable 14-Jul Salaries Expense 17-Jul Fees Earned 18-Jul Supplies 24-Jul Fees Earned 26-Jul Accounts Receivable 27-Jul Salaries Expense 29-Jul Telephone expense 31-Jul Electricity expense 31-Jul Fees Earned 31-Jul Dividends S . $ 12,500 $ 7,700 $ 2,840 $ 8,340 $ 23,440 $ 23,040 $ 17,840 $ 16,040 $ 25,490 $ 24,890 $ 28,890 $ 40,890 $ 39,090 $ 38,740 $ 38,055 $ 43,365 $ 30,865 $ 9,450 $ 600 $ 4,000 $ 12,000 $ 1,800 $ 350 $ 675 12 J2S 5,300 $ 12,500 Prepaid Rent Prepaid Insurance 1-Jul Balance 1-Jul Cash 31-Jul Adjusting 1 $ 4,800 $ $ $ 4,850 1-Jul Balance 2-Jul Cash 31-Jul Adjusting 4,800 2,400 $ 2,400 13 $ $ $ 405 4,860 4,455 Supplies Office Equipment 1-Jul Balance 1-Jul Common Stock 18-Jul Cash 31-Jul Adjusting Jl J2 J3 $ $ 3,200 600 $ $ $ 3,200 3,800 1,550 1-Jul Balance 1-Jul Common Stock 5-Jul Accounts Payable $ 7,000 $ 6,500 S - $ 7,000 $ 13,500 $ 13,500 J1 $ 2,250 Accumulated Depreciation Accounts Payable 1-Jul Balance 31-Jul Adjusting $ 750 IS $ $ - 750 750 1-Jul Balance 5-Jul Office Equipment 12-Jul Cash $ 6,500 1 J1 $ 5,200 Salaries Payable $ $ 6,500 1,300 $ 5,500 23 1-Jul Balance 31-Jul Adjusting 180 Unearned Fees 1-Jul Balance 4-Jul Cash 31-Jul Adjusting Common Stock 1-Jul Balance 1-Jul Cash, Accts Rec Supplies & Office Equip Jl $ $ 5,500 3,500 $ $ 180 180 $ 2,000 Retained Earnings $43,500 $ - $ 43,500 $ 43,500 1.Jul Balance 31-Jul Closing 31. Jul Closing $ 32,690 $ 32,690 $ 20,190 $12,500 Fees Earned Dividends 1-Jul Balance 31-Jul Cash 31-Jul Closing 2 $ 12,500 $ 12,500 $12,500 Uuu 1-Jul Balance 12-Jul Accounts Receivable 17-Jul Cash 20-Jul Accounts Receivable 24-Jul Cash 31-Jul Cash 31-Jul Accounts Receivable 31-Jul Adjusting 31-Jul closing $ 13,300 $ 9,450 $ 6,650 $ 4,000 $ 5,300 $ 3,000 $ 2,000 $ 13,300 $ 22,750 $ 29,400 $ 33,400 $ 38,700 $ 41,700 $ 43,700 $ - $43,700 Advertising Expense Salaries Expense $ J1 $ 1-Jul Balance 10-Jul Cash 31-Jul Closing 400 $ 1-Jul Balance 14-Jul Cash 27-Jul Cash 31-Jul Adjusting 31-Jul Closing 400 1 J2S J3 1,800 1.300 180 $ 400 $ $ $ $ 1,800 3,600 3,780 - $ $ 3,780 $ . Telephone expense Electricity expense $ . 1-Jul Balance 29-Jul Cash 31-Jul Closing 350 $ J2 $ 14 Insurance Expense 675 1-Jul Balance 31-Jul Cash 31-Jul Closing $ $ $ 350 . 675 - 350 | $ 675 S Supplies Expense 1-Jul Balance 31-Jul Adjusting 31-Jul Closing $ 405 $ 1-Jul Balance 31-Jul Adjusting 31-Jul Closing $ $ 2.250 405 . $ $ $ - 2,250 . S 405 $ 2,250 Depreciation Expense Rent Expense 1-Jul Balance 31-Jul Adjusting 31-Jul Closing . 750 $ $ $ S 750 1-Jul Balance 31-Jul Adjusting 31-Jul Closing J3 $ 2,400 $ $ $ . 2,400 - S 750 $ 2,400 $43,700 31-Jul Closing 31-lul Closing 31-Jul Closing Income Summary 14 14 $ 11,010 14 $ 32,690 $ 43,700 $ 32,690

Adjustments Debit Credit Income Statement Debit Credit Unadjusted TB Debit Credit 30,865 16,650 4,800 4,860 3,800 13,500 2,400 405 2,250 Adjusted TB Debit Credit 30,865 16,650 2,400 4,455 1,550 13,500 750 1,300 3,500 180 43,500 Balance Sheet Debit Credit 30,865 16,650 2,400 4,455 1,550 13,500 750 1,300 3,500 180 43,500 750 1,300 5,500 2,000 180 43,500 Diamond Consulting Account Names Cash Accounts Receivable Prepaid Rent Prepaid Insurance Supplies Office Equipment Accumulated Depreciation Accounts Payable Unearned Fees Salaries Payable Common Stock Retained Earnings Dividends Fees Earned Salaries Expense Advertising Expense Telephone expense Electricity expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense Totals Net Income Totals 12,500 12,500 12,500 41,700 2,000 43,700 43,700 180 3,780 3,600 400 350 675 405 2,250 750 2,400 7,985 400 350 675 405 2,250 750 2,400 92,930 3,780 400 350 675 405 2,250 750 2,400 11,010 32,690 43,700 92,000 92,000 7,985 92,930 43,700 81,920 49,230 32,690 81,920 43,700 81,920

Page 3 31-Jul Insurance Expense Prepaid Insurance $ 405 $ 405 $ 2,250 =3,200+600-1,550 31-Jul Supplies Expense Supplies $ 2,250 $ 750 31-Jul Depreciation Expense Accumulated Depreciation $ 750 $ 180 31-Jul Salaries Expense Salaries Payable $ 180 $ 2,400 31-Jul Rent Expense Prepaid Rent $ 2,400 $ 2,000 31-Jul Unearned Fees Fees Earned $ 2,000

43,700 Diamond Consulting Income Statement For Month ended July 31, 20Y2 Fees Earned Expenses Salaries Expense Advertising Expense Telephone expense Electricity expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense Total Expenses Net Income 3,780 400 350 675 405 2,250 750 2,400 11,010 32,690

Diamond Consulting Statement of Stockholders Equity For Month ended July 31, 20Y2 Common Stock Retained Earnings Total Equity 43,500 Balance, July 1, 20Y2 Issue of common stock Net Income Dividends Balance, July 31, 20Y2 32,690 (12,500) 20,190 43,500 32,690 (12,500) 63,690 43,500

Diamond Consulting Balance Sheet As of July 31, 20Y2 Assets Current Assets Cash Accounts Receivable Prepaid Rent Prepaid Insurance Supplies Total Current Assets Liabilities & Stockholders Equity Current Liabilities 30,865 Accounts Payable 16,650 Unearned Fees 2,400 Salaries Payable 4,455 1,550 55,920 Total Current Liabilities 1,300 3,500 180 4,980 Fixed Assets Office Equipment Accumulated Depreciation Total Fixed Assets Stockholders Equity 13,500 Common Stock (750) Retained Earnings 12,750 Total Stockholders Equity 43,500 20,190 63,690 Total Assets 68,670 Total Liabilities & Stockholders Equity 68,670

Page 4 31-Jul Fees Earned Income Summary $ 43,700 $ 43,700 $ 11,010 31-Jul Income Summary Salaries Expense Advertising Expense Telephone expense Electricity expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense $ $ $ $ $ $ $ $ 3,780 400 350 675 405 2,250 750 2,400 $ 32,690 31-Jul Income Summary Retained Earnings $ 32,690 $ 12,500 31-Jul Retained Earnings Dividends $ 12,500

Diamond Consulting Account Names Cash Accounts Receivable Prepaid Rent Prepaid Insurance Supplies Office Equipment Accumulated Depreciation Accounts Payable Unearned Fees Salaries Payable Common Stock Retained Earnings Totals Post Closing TB Debit Credit 30,865 16,650 2,400 4,455 1,550 13,500 750 1,300 3,500 180 43,500 20,190 69,420 69,420