Question

At June 30, 2017, the end of its most recent fiscal year, Ayayai Computer Consultants' post-closing trial balance was as follows: Debit Credit Cash $3,870 Accounts receivable 890 Supplies 510 Accounts payable $300 Unearned service revenue 830 Common stock 2,700 Retained earnings 1440 $5,270 $5.270 The company underwent a major expansion in July. New staff was hired and more financing was obtained. Ayayai conducted the following transactions during July 2017, and adjusts its accounts monthly. July 1 Purchased equipment, paying $3,200 cash and signing a2-year note payable for $14,800. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month. 2 Issued 14,800 shares of common stock for $37.000 cash. 3 Paid $2,400 cash for a 12-month insurance policy effective July 1 3 Paid the first 2 (UJuly and August 2017) months rent for an annual lease of office space for $3000 per month 6 Paid $2,800 for supplies Visited dlient offices and agreed on the terms of a consulting project. Ayayai will bill the client, Connor Productions, on the 20th of each month 9 for services performed. 10 Collected $890 cash on account from Milani Brothers. This client was billed in June when Ayayai performed the service. Performed services for Fitzgerald Enterprises. This client paid $830 in advance last month. All services relating to this payment are now 13 completed. 14 Paid $300 cash for a utility bill. This related to June utilities that were accrued at the end of June. 16 Met with a new client, Thunder Bay Technologies. Received $8,900 cash in advance for future services to be performed. Paid semi-monthly salaries for $8,100 Performed services worth $20,700 on account and billed customers. 20 18 20 Received a bill for $1.600 for advertising services received during July The amount is not due until August 15 23 Performed the first phase of the project for Thunder Bay Technologies. Recognized $7,400 of revenue from the cash advance received July 16. Received $11.100 cash from customers billed on July 20. 27

Answer 1

Worksheet For the month ending 31.7.2017 Post Closing Unadjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Adjustments Adjusted Particulars Cash 38960 38960 38960 Accounts Receivable 9600 9600 9600 Supplies 3310 950 2360 2360 Prepaid Insurance 2200 2400 200 2200 3000 Prepaid Rent 6000 3000 3000 18000 18000 18000 Equipment Accum. Depre Equip. 375 375 375 Payable Interest Payable 1900 590 2490 24 74 74 74 Salaries Payable 8100 8100 8100 Uneaned Service Revenue 1500 1500 1500 Income Tax Payable 890 890 890 Note Payable 14800 14800 14800 Common Stock 39700 39700 39700 Retained Earnings 1440 1440 6191 28930 Service Revenue 28930 Utility Expense 300 590 890 Salaries Expense 16200 8100 8100 Advertising Expense 1600 1600 Insurance Expense 200 200 Rent Expense 3000 3000 Supplies Expense 950 950 Depreciation Expense 375 375 Interest Expense 74 74 Income Tax Expense 890 890 Totals 74120 88270 88270 14179 14179 98299 98299 74120

Statement of Income For the month ending 31.7.2017 Service Revenue 28930 Less: Utility Expense 890 Salaries Expense 16200 Advertising Expense 1600 Insurance Expense 200 Rent Expense 3000 Supplies Expense 950 Depreciation Expense 375 Interest Expense 74 23289 5641 Income Tax Expense -890 Net Income 4751 Statement of Retained Earnings For the month ending 31.7.2017 Beginning Balance 1440 Net Income 4751 6191

Balance sheet As at.. Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Accounts Payable Cash 38960 2490 Accounts Receivable 9600 Interest Payable Salaries Payable 74 Supplies 2360 8100 Prepaid Insurance 2200 Uneaned Service Revenue 1500 56120 Income Tax Payable 3000 890 Prepaid Rent 13054 Non Current Liabilities Non Current Assets Note Payable Equipment 14800 Accum. Depre- Equip -375 17625 Shareholders Equity Common Stock 39700 Retained Earnings 6191 45891 73745 Total Liabilities & Equity Total Assets 73745

Closing Enteries Debit in $ Credit in $ Particulars Date 31.7.2017 Income Summary a/c Dr. 23289 To Utility Expense 890 To Salaries Expense 16200 To Advertising Expense 1600 Insurance Expense 200 Rent Expense 3000 To Supplies Expense 950 To Depreciation Expense 375 To Interest Expense 74 To close Expense accounts) 31.7.2017 Service Revenue a/c Dr. 28930 To Income Summary 28930 To close Revenue accounts) 31.7.2017 Income Summary a/c Dr. 5641 To Retained Earnings 5641 (Profits Transferred)