Question

Required Information [The following information applies to the questions displayed below.) Colton Enterprises experienced the following events for Year 1, the first year of operation: 1. Acquired $42,000 cash from the issue of common stock. 2. Pald $12,700 cash in advance for rent. The payment was for the period April 1, Year 1 to March 31, Year 2. 3. Performed services for customers on account for $86,000. 4. Incurred operating expenses on account of $38,500. 5. Collected $66,000 cash from accounts receivable. 6. Pald $28,000 cash for salary expense. 7. Pald $30,800 cash as a partial payment on accounts payable. Adjusting Entries 8. Made the adjusting entry for the expired rent. (See Event 2.) 9. Recorded $3,800 of accrued salaries at the end of Year 1. Events for Year 2 1. Pald $3,800 cash for the salaries accrued at the end of the prior accounting period. 2. Performed services for cash of $35,000. 3. Purchased $3,500 of supplies on account. 4. Paid $12,600 cash in advance for rent. The payment was for one year beginning April 1, Year 2. 5. Performed services for customers on account for $102,000. 6. Incurred operating expenses on account of $48,500. 7. Collected $96,000 cash from accounts receivable. 8. Pald $46,000 cash as a partial payment on accounts payable. 9. Pald $32,200 cash for salary expense. 10. Pald a $10,000 cash dividend to stockholders. Adjusting Entries 11. Made the adjusting entry for the explred rent. (Hint: Part of the rent was paid In Year 1.) 12. Recorded supplies expense. A physical count showed that $800 of supplies were still on hand.

Answer 1

D D-2 Amount Amount Statement of changes in equity Year 1 Particulars Amount Issue of common stock 42000 Retained earnings 3000 Total equity 45000 С Before solving, lets create a trial balance first Trial balance for year 1 Particulars Debit Credit Cash (42000-12700+66000-28000-30800) 36500 Common stock 42000 Prepaid rent(12700-12700) 0 Service revenue 86000 Accounts receivable(86000-66000 20000 Operating expense 38500 Accounts payable(38500-30800) 7700 Salary expense(28000+3800) 31800 Rent expense 12700 Accrued salaries 3800 139500 139500 D-4 CASH FLOW STATEMENT Particulars Operating Activities Profit Add: Increase in accounts payable Less: Increase in accounts receiv. Add: Inc. in accrued salaries Net cash used 3000 7700 -20000 3800 -5500 Amount Amount D-3 BALANCE SHEET Particulars Assets Current Assets Accounts receivable Cash Total Assets Investing activities 0 20000 36500 Financing Activities 56500 Total Issue of common stock 42000 36500 Liabilities Accounts payable Accrued salaries Total liabilities 7700 3800 Net cash used Add: Opening cash (5) Closing cash Amount 86000 0 11500 36500 D-1 Income Statement for year 1 Particulars Service revenue Expenses Operatin expense Salary expense Rent expense - Total expense Profit 38500 31800 12700 Stockholder's equity Common stock Retained earnings Total equity Total liabilities & equity 42000 3000 83000 3000 45000 56500