Question

June 1: Byte of Accounting, Inc. issued 2,580 shares of its common stock to Jeremy after $30,160 in cash and computer equipment with a fair market value of $44,660 were received.

June 1: Byte of Accounting, Inc. issued 1,962 shares of its common stock after acquiring from Courtney $42,050 in cash, computer equipment with a fair market value of $13,920 and office equipment with a fair value of $928.

June 1:   Byte of Accounting, Inc. acquired $69,600 in cash from Amaya Rosemond and issued 2,400 shares of its common stock.

June 2: A down payment of $27,000 in cash was made on additional computer equipment that was purchased for $135,000. A five-year note was executed by Byte for the balance.

June 4: Additional office equipment costing $600 was purchased on credit from Discount Computer Corporation.

June 8: Unsatisfactory office equipment costing $120 was returned to Discount Computer for credit to be applied against the outstanding balance owed by Byte.

June 10: Byte paid $20,750 on the balance it owed on the June 2 purchase of computer equipment.

June 14: A one-year insurance policy covering its computer equipment was purchased by Byte for $6,144 in cash. The effective date of the policy was June 16.

June 16: Computer consultation revenue of $7,250 was received.

June 16: Byte purchased a building and the land it is on for $137,000, to house its repair facilities and to store computer equipment. The lot on which the building is located is valued at $22,000. The balance of the cost is to be allocated to the building. Byte made a cash down payment of $13,700 and executed a mortgage for the balance. The mortgage is payable in eight equal annual installments beginning July 1.

June 17: Cash of $4,200 was paid for rent for June and July. Put the total amount into the Prepaid Rent account.

June 17: Received a bill of $325 from the local newspaper for advertising.

June 21: Billed various miscellaneous local customers $4,400 for consulting services performed.

June 21: A fax machine for the office was purchased for $700 cash.

June 21: Accounts payable in the amount of $480 were paid.

June 22: Paid the advertising bill that was received on June 17.

June 22: Received a bill for $1,190 from Computer Parts and Repair Co. for repairs to the computer equipment.

June 22: Paid salaries of $935 to equipment operators for the week ending June 18.

June 23: Cash in the amount of $3,525 was received on billings.

June 23: Purchased office supplies for $655 on credit. Record the purchase as an increase to the assets.

June 28: Billed $5,805 to miscellaneous customers for services performed to June 25.

June 29: Cash in the amount of $5,500 was received for billings.

June 29: Paid the bill received on June 22, from Computer Parts and Repairs Co.

June 29: Paid salaries of $935 to equipment operators for the week ending June 25.

June 30: Received a bill for the amount of $840 from O & G Oil and Gas Co.

June 30: Paid a cash dividend of $0.20 per share to the three shareholders of Byte. [IMPORTANT NOTE: The number of shares of capital stock outstanding can be determined from the first three transactions.]

Adjusting Entries - Round to two decimal places.

The rent payment made on June 17 was for June and July. Expense the amount associated with one month's rent.

A physical inventory showed that only $270.00 worth of office supplies remained on hand as of June 30.

The annual interest rate on the mortgage payable was 7.50 percent. Interest expense for one-half month should be computed because the building and land were purchased and the liability incurred on June 16.

Information relating to the prepaid insurance may be obtained from the transaction recorded on June 14. Expense the amount associated with one half month's insurance.

A review of Byte’s job worksheets show that there are unbilled revenues in the amount of $5,750 for the period of June 28-30.

The fixed assets have estimated useful lives as follows:

Building - 31.5 years

Computer Equipment - 5.0 years

Office Equipment - 7.0 years

Use the straight-line method of depreciation. Management has decided that assets purchased during a month are treated as if purchased on the first day of the month. The building’s scrap value is $7,500. The office equipment has a scrap value of $400. The computer equipment has no scrap value. Calculate the depreciation for one month.

A review of the payroll records show that unpaid salaries in the amount of $561 are owed by Byte for three days, June 28 - 30.

The note payable relating to the June 2, and 10 transactions is a five-year note, with interest at the rate of 12 percent annually. Interest expense should be computed based on a 360 day year.

[IMPORTANT NOTE: The original note on the computer equipment purchased on June 2 was $108,000.   On June 10, eight days later, $20,750 was repaid. Interest expense must be

calculated on the $108,000 for eight days. In addition, interest expense on the $87,250 balance of the loan ($108,000 less $20,750 = $87,250) must be calculated for the 20 days remaining in the month of June.]

Income taxes are to be computed at the rate of 25 percent of net income before taxes.

[IMPORTANT NOTE: Since the income taxes are a percent of the net income you will want to prepare the Income Statements through the Net Income Before Tax line. The worksheet contains all of the accounts and their balances which you can then transfer to the appropriate financial statement.]

Closing Entries

Close the revenue accounts.

Close the expense accounts.

Close the income summary account.

Close the dividends account.

Answer 1

Credit Calculation Byte of Accounting Inc Journal entries N-Date Name 1 1-Jun Cash Computer Equipment Common Stock Debit 30,160.00 44,660.00 74,820.00 2 1-Jun Cash Computer Equipment Office Equipment Common Stock 42,050.00 13,920.00 928.00 56,898.00 3 69,600.00 1-Jun Cash Common Stock 69,600.00 4 135,000.00 2-Jun Computer Equipment Cash Note Payable 27,000.00 108,000.00 5 600.00 4-Jun Office Equipment Accounts payable 600.00 6 120.00 8-Jun Accounts payable Office Equipment 120.00 7 20,750.00 10-Jun Note Payable Cash 20,750.00 8 6,144.00 1 year wef June 16 14-Jun Prepaid Insurance Cash 6,144.00 9 7,250.00 16-Jun Cash Computer Consultation Revenue 7,250.00 10 22,000.00 115,000.00 =137,000-22,000 16-Jun Land Building Cash Mortgage Payable 13,700.00 123,300.00 =137,000-13,700 11 4,200.00 June and July 17-Jun Prepaid Rent Cash 4,200.00 12 325.00 17-Jun Advertising expense Accounts Payable 325.00 13 4,400.00 21-Jun Accounts Receivable Computer Consultation Revenue 4,400.00 14 700.00 21-Jun Office Equipment Cash 700.00 15 480.00 21-Jun Accounts Payable Cash 480.00 16 325.00 22-Jun Accounts Payable Cash 325.00 17 1,190.00 22-Jun Repairs & Maintenance expense Accounts Payable 1,190.00 18 22-Jun Salary expense 935.00 Cash 935.00 3,525.00 1923-Jun Cash Accounts Receivable 3,525.00 20 655.00 23-Jun Office Supplies Accounts Payable 655.00 21 5,805.00 28-Jun Accounts Receivable Computer Consultation Revenue 5,805.00 22 5,500.00 29-Jun Cash Accounts Receivable 5,500.00 23 1,190.00 29-Jun Accounts Payable Cash 1,190.00 24 935.00 29-Jun Salary expense Cash 935.00 25 840.00 30-Jun Oil & gas expense Accounts Payable 840.00 26 988.40 =(2,580+1,962 +2,400) *0.20 30-Jun Dividends Cash 988.40

Credit Adjusting entries No. Date Name 27 30-Jun Rent expense Prepaid rent Debit 2,100.00 Calculation -4,200/2 2,100.00 28 385.00 =655-270 30-Jun Supplies expense Office Supplies 385.00 29 385.31 =123,300*7.50%*0.5/12 30-Jun Interest expense Interest Payable 385.31 30 256.00 =6,144/12*0.5 30-Jun Insurance expense Prepaid Insurance 256.00 31 5,750.00 30-Jun Accounts Receivable Computer Consultation Revenue 5,750.00 32 3,531.06 30-Jun Depreciation expense Accum. Depr. - Building Accum. Depr. - Computer Equip Accum. Depr. - Office Equip 284.39 3,226.33 20.33 =(115,000-7,500)/31.5*1/12 =(44,660+13,920+135,000)/5*1/12 =((928+600-120+700)-400)/7*1/12 33 561.00 30-Jun Salary expense Salaries Payable 561.00 34 869.67 30-Jun Interest expense Interest Payable (108,000*12%*8/360)+((108,000- 20,750) *12%*20/360) 869.67 35 2,722.99 30-Jun Income tax expense Income tax Payable =10,891.96*25% 2,722.99 Refer Income Statement Closing entries 36 30-Jun Computer Consultation Revenue Income Summary 23,205.00 23,205.00 37 15,036.03 30-Jun Income Summary Rent expense Salary expense Advertising expense Repairs & maintenance expense Oil & gas expense Supplies expense Interest expense Insurance expense Depreciation expense Income tax expense 2,100.00 2,431.00 325.00 1,190.00 840.00 385.00 1,254.98 256.00 3,531.06 2,722.99 38 8,168.97 30-Jun Income Summary Retained Earnings 8,168.97 39 988.40 30-Jun Retained Earnings Dividends 988.40

Date Credit Date Credit Credit Debit Date Accounts Receivable 4,400.00 23-Jun 5,805.00 29-Jun 5,750.00 Debit Date Prepaid Insurance 6,144.00 30-Jun Date Debit Date Prepaid Rent 17-Jun 4,200.00 30-Jun 14-Jun 256.00 21-Jun 28-Jun 30-Jun 2,100.00 3,525.00 5,500.00 Byte of Accounting, Inc. T Accounts Date Debit Date Credit Cash 1-Jun 69,600.00 2-Jun 27,000.00 1-Jun 30,160.00 10-Jun 20,750.00 1-Jun 42,050.00 14-Jun 6,144.00 16-Jun 7,250.00 16-Jun 13,700.00 23-Jun 3,525.00 17-Jun 4,200.00 29-Jun 5,500.00 21-Jun 480.00 21-Jun 700.00 22-Jun 935.00 22-Jun 325.00 29-Jun 1,190.00 29-Jun 935.00 30-Jun 988.40 Bal. Bal. 80,737.60 Office Supplies 655.00 30-Jun Bal. 6,930.00 Land 16-Jun 22,000.00 Bal. 5,888.00 Building 16-Jun 115,000.00 2,100.00 Accum. Depr.- Building 30-Jun 23-Jun 385.00 284.39 Bal. Bal. 284.39 Bal. 270.00 Computer Equipment 1-Jun 44,660.00 1-Jun 13,920.00 2-Jun 135,000.00 Bal. 22,000.00 Accum. Depr. - Computer Equipment 30-Jun 3,226.33 115,000.00 Office Equipment 928.00 600.00 8-Jun 700.00 Accum. Depr.- Office Equipment 30-Jun 20.33 1-Jun 4-Jun 21-Jun 120.00 Bal. 3,226.33 Bal. 20.33 Advanced payment 2,108.00 Interest Payable 30-Jun 30-Jun Salaries Payable 30-Jun 561.00 193,580.00 Accounts Payable 120.00 4-Jun 480.00 17-Jun 325.00 22-Jun 1,190.00 23-Jun 30-Jun 8-Jun 21-Jun 22-Jun 29-Jun 385.31 869.67 600.00 325.00 1,190.00 655.00 840.00 Bal. 1,495.00 1,254.98 561.00 Income Taxes Payable 30-Jun Bal. Mortagage Payable 16-Jun 123,300.00 Bal. Note Payable 20,750.00 2-Jun 2,722.99 10-Jun 108,000.00 Bal. Common Stock 1-Jun 1-Jun 1-Jun 69,600.00 74,820.00 56,898.00 2,722.99 123,300.00 87,250.00 Bal. 201,318.00 Bal. Retained Earnings 988.40 30-Jun Bal. Dividends 988.40 30-Jun Bal. Income Summary 15,036.03 30-Jun 8,168.97 30-Jun 8,168.97 30-Jun 988.40 23,205.00 30-Jun 30-Jun Bal. Advertising expense 325.00 7,180.57 Computer Consultation Revenue 16-Jun 7,250.00 21-Jun 4,400.00 28-Jun 5,805.00 30-Jun 23,205.00 30-Jun 5,750.00 Rent expense 2,100.00 30-Jun 17-Jun 22-Jun 29-Jun 30-Jun Salary expense 935.00 935.00 561.00 30-Jun 30-Jun 2,100.00 2,431.00 30-Jun 325.00 Bal. Bal. Bal. Repairs & maintenance expense 22-Jun 1,190.00 30-Jun 1,190.00 30-Jun Oil & gas expense 840.00 30-Jun 30-Jun Supplies expense 385.00 30-Jun 30-Jun 30-Jun Interest expense 385.31 869.67 30-Jun 840.00 385.00 1,254.98 Bal. Bal. Bal. Bal. Insurance expense 256.00 30-Jun Income tax expense 2,722.99 30-Jun 30-Jun 30-Jun 30-Jun Depreciation expense 284.39 3,226.33 20.33 30-Jun 30-Jun 256.00 3,531.06 30-Jun 2,722.99 Bal. Bal. 2,722.99

23,205.00 Byte of Accounting, Inc. For the month ending June 30, 2019 Income Statement Computer Consultation Revenue Expenses: Rent expense Salary expense Advertising expense Repairs & maintenance expense Oil & gas expense Supplies expense Interest expense Insurance expense Depreciation expense Total Expenses 2,100.00 2,431.00 325.00 1,190.00 840.00 385.00 1,254.98 256.00 3,531.06 12,313.04 Net Income before taxes Income Tax Expense @ 25% Net Income 10,891.96 2,722.99 = 10,891.96*25% 8,168.97