Question

[The following information applies to the questions displayed below.] Colton Enterprises experienced the following events for Year 1, the first year of operation: Acquired $36,000 cash from the issue of common stock. Paid $12,100 cash in advance for rent. The payment was for the period April 1, Year 1, to March 31, Year 2. Performed services for customers on account for $74,000. Incurred operating expenses on account of $35,500. Collected $57,000 cash from accounts receivable. Paid $22,000 cash for salary expense. Paid $28,400 cash as a partial payment on accounts payable. Adjusting Entries Made the adjusting entry for the expired rent. (See Event 2.) Recorded $2,600 of accrued salaries at the end of Year 1. Events for Year 2 Paid $2,600 cash for the salaries accrued at the end of the prior accounting period. Performed services for cash of $23,000. Purchased $2,900 of supplies on account. Paid $10,800 cash in advance for rent. The payment was for one year beginning April 1, Year 2. Performed services for customers on account for $90,000. Incurred operating expenses on account of $42,500. Collected $90,000 cash from accounts receivable. Paid $40,000 cash as a partial payment on accounts payable. Paid $31,600 cash for salary expense. Paid a $10,000 cash dividend to stockholders. Adjusting Entries Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in Year 1.) Recorded supplies expense. A physical count showed that $500 of supplies were still on hand. g. Repeat parts a through f for Year 2. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Statement of Cash Flows only, items to be deducted must be indicated with a negative amount. )

Answer 1

Colton Enterprises Journal Entery Year 1 Particulars 1 Cash a/c Dr. To Common Stock (Common Stock issued) Debit in $ Credit in $ 36000 36000 Dr. 12100 Prepaid Rent a/c To Cash (one year rent paid) 12100 3 74000 Accounts Receivable a/c Dr. To Service Revenue (Service provided on account) 74000 35500 Operating Expense a/c Dr. To Accounts Payable (Operating expense on account) 35500 Dr. 57000 Cash a/c To Accounts Receivable (Cash from debtors) 57000 Dr. 22000 Salary Expense a/c To Cash (Salary paid) 22000 28400 Accounts Payable a/c Dr. To Cash (Creditors paid) 28400 Date Adjusting Enteries Particulars 31.12.Year 1 Rent Expense a/c Dr. To Prepaid Rent (Rent expensed) 12100 x 9/12 Debit in $ Credit in $ 9075 9075 2600 31.12.Year 1 Salary Expense a/c Dr. To Salaries Payable (Salary accrued) 2600

Worksheet For the period ending Year 1 Particulars Cash Accounts Receivable Prepaid Rent Accounts Payable Salaries Payable Common Stock Retained Earnings Service Revenue Operating Expense Rent Expense Salary Expense Totals Unadjusted Adjustments Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 30500 30500 30500 17000 17000 17000 12100 9075 3025 3025 7100 7100 7100 2600 2600 2600 36000 36000 36000 4825 74000 74000 35500 35500 9075 9075 22000 2600 24600 117100 117100 11675 11675 119700 119700 50525 50525 74000 Statement of Income For the period ending Year 1 Service Revenue Less: Operating Expense Rent Expense Salary Expense Net Income 35500 9075 24600 69175 4825

Amounts in $ Amounts in $ Balance sheet As at 31.12.Year 1 Assets Current Assets Cash Accounts Receivable Prepaid Rent Amounts in $ Amounts in $ Liabilities Current Liabilities 30500 Accounts Payable 17000 Salaries Payable 3025 50525 7100 2600 9700 Shareholders Equity Common Stock Retained Earnings 50525 Total Liabilities & Equity 36000 4825 40825 Total Assets 50525

Journal Entery Year 2 Particulars 1 Salaries Payable a/c To Cash (Salary paid) Dr. Debit in $ Credit in $ 2600 2600 Dr. 23000 Cash a/c To Service Revenue (Service provided in cash) 23000 3 2900 Supplies a/c Dr. To Accounts Payable (Supplies on account) 2900 4 Dr. 10800 Prepaid Rent a/c To Cash (one year rent paid) 10800 5 90000 Accounts Receivable a/c Dr. To Service Revenue (Service provided on account) 90000 42500 Operating Expense a/c Dr. To Accounts Payable (Operating expense on account) 42500 7 90000 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 90000 8 40000 Accounts Payable a/c Dr. To Cash (Creditors paid) 40000 9 Dr. 31600 Salary Expense a/c To Cash (Salary paid) 31600 10 Dr. 10000 Dividend a/c To Cash (Dividend paid) 10000 Adjusting Enteries Date Particulars Debit in $ Credit in $ 31.12.Year 2 Rent Expense a/c Dr. 11125 To Prepaid Rent (Rent expensed) 12100 x 3/12 + 10800 x 9/12 11125 31.12.Year 2 Supplies Expense a/c Dr. 2400 To Supplies (Suppliesexpensed) 2900 - 500 = 2400 2400

Worksheet For the period ending Year 2 Unadjusted Adjustments Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 48500 48500 48500 17000 17000 17000 2900 2400 500 500 13825 11125 2700 2700 12500 12500 12500 Particulars Cash Accounts Receivable Supplies Prepaid Rent Accounts Payable Salaries Payable Common Stock Retained Earnings Dividend Service Revenue Operating Expense Rent Expense Supplies Expense Salary Expense Totals 36000 4825 36000 4825 36000 20200 10000 10000 113000 113000 42500 11125 2400 42500 11125 2400 31600 166325 31600 166325 166325 13525 13525 166325 68700 68700 113000 Statement of Income For the period ending Year 2 Service Revenue Less: Operating Expense Rent Expense Supplies Expense Salary Expense Net Income 42500 11125 2400 31600 87625 25375

Statement of Retained Earnings For the period ending Year 2 Beginning Balance Net Income Dividends 4825 25375 -10000 20200 25375 Statement of Cashflow For the period ending Year 2 Cashflow from Operating Activity Net Income Adjustments: Increase in Accounts Receivable Increase in Supplies Increase in Prepaid Rent Increase in Accounts Payable Decrease in Salaries Payable Cash generated from Operating activity -500 325 5400 -2600 2625 28000 Cashflow from Investing Activity -10000 Cashflow from Financing Activity Payment of Dividend Cash used for Financing Activity Net Increase in Cash Beginning Cash Balance Ending Cash Balance -10000 18000 30500 48500

Balance sheet As at 31.12.Year 2 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Rent Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Liabilities 48500 Accounts Payable 12500 17000 12500 500 2700 68700 Shareholders Equity Common Stock 36000 Retained Earnings 20200 56200 68700 Total Liabilities & Equity 68700 Total Assets