Question

a. On January 1, 2017, Frances Corporation started doing business and the owners contributed $200,000 capital in cash. b. The company paid $24,000 to cover the rent for the office space for the 24-month period from January 1, 2017, to December 31, 2018 c. On March 1, 2017, MSK Inc. entered into a consulting contract under which Frances Corporation promised to provide consulting to MSK Inc. In return, MSK promised to pay a fee of $150,000, which was to be paid in January 2018. Frances fulfilled its contractual obligation during 2017 d. On July 1, 2017, Frances purchased office equipment for $100,000 cash. The equipment has an estimated useful life of five years and no salvage value. The equipment was immediately placed into use. Frances uses the straight-line method of depreciation. It records depreciation expense in proportion to the number of months' usage. December 31, 2017, were $6,000. during 2018 e. Through November 30, 2017, the company had paid $66,000 to its employees for 11 months of salaries. Accrued salaries on f. On December 31, 2017, Norbert Corporation advanced $20,000 to Frances Corporation for consulting services to be provided Required: 1. Provide journal entries for each of these transactions. 2. Provide adjusting entries at the end of the year. 3. Prepare an income statement for the year ended December 31, 2017 4. Prepare a balance sheet as of December 31, 2017.

Answer 1

(1) Prepare the journal entries: Debit (S) Credit (S) Date Account title Cash Contributed capital [To record the contributed capital by owners.] 1-Jan 200,000 2017 200,000 S Debit (S) Credit (S) Date Account title Prepaid rent Cash [To record the rent paid for office space from Jan 1, 2017 to December 31.] 1-Jan 24,000 2017 24,000 Debit ($) Credit (S) Date Account title 1-Mar |No entry required on entering a contract 2017 Debit (S) Credit (S) Date Account title Equipment Cash [To record the entry for purchase of office equipment.] 1-Jul 100,000 2017 100,000 Debit (S) Credit (S) Date Account title 30-Nov Salaries expense 66,000 Cash 2017 66,000 [To record entry for salary paid to employees.] Debit (S) Credit (S) Date Account title 31-Dec Cash 20,000 Advances from customer 2017 20,000 [To record entry for advance-consulting fees received from N Corp. which are unearned at |year-end.]

(2) Prepare adjusting entries at the end of the year Debit (S) Credit (S Date Account title 31-Dec Rent expense ($24,000 2 years) 12,000 Prepaid rent [To record the rent expired for the year.] 2017 12,000 Debit (S) Credit (S) Date Account title 31-Dec Accounts receivable 150,000 Revenue from services rendered [To record the revenue earned.] 2017 150,000 Debit (S) Credit (S) Date Account title 31-Dec Depreciation expense [$100,000 5 years x 1/2] Accumulated depreciation - Equipment [To record the depreciation expense equipment for the year.] 10,000 X 2017 10,000 on Debit (S) Credit (S) Date Account title 31-Dec Salaries expense 6,000 Salaries payable [To record the accrued salaries for December 2017.] 2017 6,000

(3) Prepare an income statement for the year ended December 31, 2017: F Corporation Income Statement For the year ended December 31, 2017 Amount Amount Particulars (S) (S) 150,000 Revenue from services rendered Less: Expenses Salaries ($66,000 $6,000) Rent ($24,000 2 years) |Depreciation ($100,000 5 years x 1/2) Total expenses Net income (72,000) (12,000) (10,000) (94,000) 56,000

(4) Prepare a balance sheet as of December 31, 2017: F Corporation Balance Sheet As at December 31, 2017 Amount Amount Assets Cash Accounts receivable 30,000 150,000 12,000 Prepaid Equipment Less: Accumulated depreciation Net equipment rent 100,000 (10,000) 90,000 Total assets 282,000 Liabilities & Equity Liabilities: Salaries payable Advances from customers 6,000 20,000 26,000 Stockholder's equity: Capital stock Retained earnings Total liabilities and stockholder's equity 200,000 56,000 256,000 282,000