Question

Colton Enterprises experienced the following events for Year 1, the first year of operation:

1. Acquired $50,000 cash from the issue of common stock.
2. Paid $13,500 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 $102,000.
4. Incurred operating expenses on account of $42,500.
5. Collected $78,000 cash from accounts receivable.
6. Paid $36,000 cash for salary expense.
7. Paid $34,000 cash as a partial payment on accounts payable.

Adjusting Entries

8. Made the adjusting entry for the expired rent. (See Event 2.)
9. Recorded $5,400 of accrued salaries at the end of Year 1.

Events for Year 2

1. Paid $5,400 cash for the salaries accrued at the end of the prior accounting period.
2. Performed services for cash of $51,000.
3. Purchased $4,300 of supplies on account.
4. Paid $15,000 cash in advance for rent. The payment was for one year beginning April 1, Year 2.
5. Performed services for customers on account for $118,000.
6. Incurred operating expenses on account of $56,500.
7. Collected $104,000 cash from accounts receivable.
8. Paid $54,000 cash as a partial payment on accounts payable.
9. Paid $33,000 cash for salary expense.
10. Paid a $12,000 cash dividend to stockholders.

Adjusting Entries

11. Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in Year 1.)
12. Recorded supplies expense. A physical count showed that $650 of supplies were still on hand.

b. Post the Year 1 events to T-accounts

Answer 1

Ledger accounts

Cash					Common stock
Entry 1	50000	Entry 2	13500				Entry 1	13500
entry 5	78000	entry 6	36000
		entry 7	34000				balance	13500
					Service revenue
Balance	44500						entry 3	102000
							balance	102000
Salaries expense					Accounts payable
Entry 6	36000				entry 7	34000	entry 4	42500
balance	36000						balance	8500
					Salaries payable
							Adj 2	5400
Prepaid Rent
Entry 2	13500	Adj 1	10125				balance	5400
balance	3375				Operating expenses
Accounts receivbale					entry 4	42500
entry 3	102000	entry 5	78000		balance	42500
					Rent expenses
balance	24000				Adj 1	10125
					balance	10125
					Salaries expenses
					Adj 2	5400
					balance	5400

Journal entries

No.	Accounts	debit	credit
1	cash	50000
	common stock		50000
2	Prepaid rent	13500
	cash		13500
3	Accounts receivable	102000
	service revenue		102000
4	Operating expenses	42500
	accounts payable		42500
5	Cash	78000
	accounts receivable		78000
6	Salaries expense	36000
	cash		36000
7	Accounts payable	34000
	cash		34000
Adj 1	rent expense	10125
	prepaid rent		10125
Adj 2	salaries expense	5400
	salaries payable		5400