Question

Karla Tanner opened a web consulting business called Linkworks and recorded the following transactions in its first month of operations.

Apr.		1		Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock.
Apr.		2		The company prepaid $9,000 cash for twelve months’ rent for office space. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		3		The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days.
Apr.		6		The company completed services for a client and immediately received $4,000 cash.
Apr.		9		The company completed a $6,000 project for a client, who must pay within 30 days.
Apr.		13		The company paid $11,600 cash to settle the account payable created on April 3.
Apr.		19		The company paid $2,400 cash for the premium on a 12-month insurance policy. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		22		The company received $4,400 cash as partial payment for the work completed on April 9.
Apr.		25		The company completed work for another client for $2,890 on credit.
Apr.		28		The company paid $5,500 cash in dividends.
Apr.		29		The company purchased $600 of additional office supplies on credit.
Apr.		30		The company paid $435 cash for this month’s utility bill.

Descriptions of items that require adjusting entries on April 30, follow.

• a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space.

• b) The balance in Prepaid insurance represents the premium paid for a 12-month insurance policy the policy's coverage began on April 1.

• c) Office supplies on hand as of April 30 total $1,200.

• d) Straight-line depreciation of office equipment, based on a 5-year life and a $4,000 salvage value, is $500 per month.

• e) The company has completed work for a client, but has not yet billed the $1,800 fee.

• f) Wages due to employees, but not yet paid, as of April 30 total $2,600

• Requirement
• General Journal
• General Ledger
• Trial Balance
• Income Statement
• St Retained Earnings
• Balance Sheet
• Impact on Income

• General Journal tab -For each transaction, review the unadjusted balance and prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred. After adjusting the accounts, review the general ledger and trial balance for accuracy.

  General Ledger tab - Each journal entry is posted automatically to the general ledger. Use the drop-down button to view the unadjusted or adjusted balances.

  Trial Balance tab - You may view either the unadjusted or adjusted trial balance by choosing from the dropdown box below. Your choice will determine the reported values on the financial statement tabs.

  Income Statement tab - Use the drop-downs to select the accounts properly included on the income statement. The unadjusted or adjusted balances will appear for each account, based on your selection.

  Statement of Retained earnings tab - The unadjusted or adjusted balances will appear for each account, based on your selection.

  Balance Sheet tab - Use the drop-downs to select the accounts properly included on the balance sheet. The unadjusted or adjusted balances will appear for each account, based on your selection.

  Impact on Income tab -For each adjustment, indicate the income statement and balance sheet account affected, and the impact on net income. If an adjustment caused net income to decrease, enter the amount as a negative value. Net income before adjustments can be found on the income statement tab. (Hint: Select unadjusted on the dropdown.)

Answer 1

Linkworks Journal Enteries Date Particulars 1.4.2019 Cash a/c Dr. Office Equipment a/c Dr. To Common Stock (Capital Invested) Debit in $ Credit in $ 80000 26000 106000 2.4.2019 9000 Prepaid Rent a/c Dr. To Cash (12 months rent paid) 9000 8000 3600 3.4.2019 Office Equipment a/c Dr. Office Supplies a/c Dr. To Accounts Payable (Purchase on account) 11600 6.4.2019 4000 Cash a/c Dr. To Service Revenue (Services provided in cash) 4000 6000 9.4.2019 Accounts Receivable a/c Dr. To Service Revenue (Services provided on account) 6000 11600 13.4.2019 Accounts Payable a/c Dr. To Cash (Creditors paid) 11600 2400 19.4.2019 Prepaid Insurance a/c Dr. To Cash (12 months insurance paid) 2400

Dr. Date Particulars 22.4.2019 Cash a/c To Accounts Receivable (Cash from debtors) Debit in $ Credit in $ 4400 4400 2890 25.4.2019 Accounts Receivable a/c Dr. To Service Revenue (Services provided on account) 2890 5500 28.4.2019 Dividends a/c To Cash (Dividends paid in cash) 5500 600 29.4.2019 Office Supplies a/c Dr. To Accounts Payable (Office supplies on credit) 600 Dr. 435 30.4.2019 Utility Expense a/c To Cash (Utility expense paid) 435 Debit in $ Credit in $ Adjusting Enteries Date Particulars 30.4.2019 Rent Expense a/c Dr. To Prepaid Rent (Rent expensed) 9000 / 12 = 750 750 200 30.4.2019 Insurance Expense a/c Dr. To Prepaid Insurance (Rent expensed) 2400 / 12 = 200 200 30.4.2019 Supplies Expense a/c Dr. 3000 To Office Supplies (Supplies expensed) 3600+600 - 1200 3000 500 30.4.2019 Depreciation Expense a/c Dr. To Accum. Depre - Equip. (To record depreciation) 500 1800 30.4.2019 Accounts Receivable a/c Dr. To Service Revenue (Services provided on account) 1800 Dr. 2600 30.4.2019 Wages Expense a/c To Wages Payable (Wages accrued) 2600

Worksheet For the month ending 30.4.2019 500 Particulars Cash Accounts Receivable Office Supplies Prepaid Rent Prepaid Insurance Office Equipment Accum. Depre - Equip. Accounts Payable Wages Payable Common Stock Dividends Service Revenue Utility Expense Rent Expense Insurance Expense Supplies Expense. Depreciation Expense Wages Expense Totals Unadjusted Adjustment Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 59465 59465 4490 1800 6290 4200 3000 1200 9000 750 8250 2400 200 2200 34000 34000 500 600 600 2600 2600 106000 106000 5500 12890 1800 14690 435 435 750 750 200 200 3000 3000 500 500 2600 2600 119490 119490 8850 8850 124390 124390 5500

14690 Statement of Income For the month ending 30.4.2019 Service Revenue Less: Utility Expense Rent Expense Insurance Expense Supplies Expense. Depreciation Expense Wages Expense Net Income 435 750 200 3000 500 2600 7485 7205 Statement of Retained Earnings For the month ending 30.4.2019 Retained Earnings 1.4.2019 Net Income Less: Dividends Retained Earnings 30.4.2019 7205 -5500 1705

Amounts in $ Amounts in $ Amounts in $ Amounts in $ Balance sheet As at 30.4.2019 Assets Current Assets Cash Accounts Receivable Office Supplies Prepaid Rent Prepaid Insurance Liabilities Current Liabilities Accounts Payable Wages Payable 600 2600 3200 59465 6290 1200 8250 2200 TE 77405 Non Current Assets Office Equipment Accum. Depre - Equip. Total Assets 34000 -500 Shareholders Equity Common Stock 33500 Retained Earnings 110905 Total Liabilities & equity 106000 1705 107705 110905 Account effecting the : Adjusting Entry related to: Income Stat. Balance sheet a. Rent Rent Expense Prepaid Rent b.Insurance Insurance Expense Prepaid Insurance c. Office Supplies Supplies Expense. Office Supplies d.Depreciation Depreciation Expense Accum. Depre - Equip. e.Unbilled fees Service Revenue Accounts Receivable f.Unpaid wages Wages Expense Wages Payable Net Income before adjustments would be understated by Impact on Net Income -750 -200 -3000 -500 14690 -2600 7640