Question

Hillsborough Services was formed on May 1, 2019. The following transactions took place during the first month. May 1 Stockholders invested $161,000 cash in exchange for common stock. 1 Hired two employees to work in the warehouse. They will each be paid a salary of $5,200 per month. 1 Signed a 2-year rental agreement on a warehouse; paid $2,700 cash in advance for the first two months. 1 Purchased equipment costing $26,000. A cash payment of $5,000 was made immediately; the remainder will be paid in 6 months. 5 Purchased basic office supplies for $100 cash. 9 Purchased more office supplies for $6,700 on account. 12 Total revenues were $22,000-$7,000 cash and the balance on account. 15 Paid $100 to suppliers for accounts payable due. 19 Received $6,200 from customers in payment of accounts receivable. 23 Received utility bills in the amount of $560, to be paid next month. 31 Paid the monthly salaries of the two employees. Instructions a) Prepare journal entries to record each of the events listed. (Omit explanations.) b) Post the journal entries to T-accounts. c) Prepare an adjusted trial balance as of May 31, 2019. d) Make following adjustments: i) One month's prepaid rent has expired. ii) Office supplies on hand at May 31, 2019 amounted to $210. iii) The equipment has an estimated useful life of 80 months. The estimated salvage value is $1,200. e) Prepare the adjusted trial balance. f) Prepare the income statement, the statement of changes in equity, the balance sheet and the statement of cash flows.

Answer 1

Hi,

Kindly note that the prepaid rent entry was missed to pass at first. However, it is passed at the end. Kindly read accordingly.

Thanks.

Solution : @ Date Account Credit ($) Debit($) 1,61,000 May I Cash Share Capital 1,61,000 May ! 26,000 Equipment cash Notes 5,000 payable 21,000 May 5 - 100 Office supplies Cash 100 May 9 6,700 Office supplies Accounts payable 6,700 7,000 Cash Accounts Receivable Service Revenue 22,000 May 15 Accounts Cash payable 100 100 May 19 6, 200 Cash Accounts Receivable 6,200 May 23 560 Utility Expenses Accounts payable 560 560 10,400 Salories C Cash 10400 _2,700 2,700 May ! Prepaid Rent - Cash This journal entry scared CamScanner passed above should have been Tcs

Solution 6 Cash Alc May 1 May 12 Today 19 shore Capital 11,61,000 May Equipment 5,000 May 5 Office Supplies 100 Service Revenue 7,000 may 15 Accounts poyable 100 Accounts Receivable 6,200 May 31/ salaries 10,400 May! Prepaid Ront / 2,700 T174.200 mys Balance clf 1,55,900 1,74,200 Share Capital Mayll Cash May 31/ Balance clF 11,61,000 1,61,000 May may Cash Notes Poyable quipment 5000 21000 may 31 Bal elf 26,000 Toal 26000 26,000 Noles Payable t May 1 / Equipment 21,000 May 34 Balance clF21000 Office Supplies 1oo say May 9 Accounts Pegable 6700 May 31 Balance clf 6,800 6,800 16,800 May 5 cas Accounts payable may 15 cash 100 1,160 May 31/ Balance of - scanned with catscanner Maya Office Supplies 6,700 May 23 Utilities expenses 560 17, 260 7.260 d with

Solution : (b) - continued Accounts Receivable May 12 service Rouenue 15000 May 19 / Cash I Balonce clf 15000 6,200 8,800 15000 - 7000 Service Revenue May 12 Cash Mayis accounts Receivable 15000 22000 22000 22.000 Balance CIF Expenses may - Utility Accounts Payable 560 Balonce clf | 560 may 31/ Cash Salaries 10,400 - May 31 Balonce clk 110,400 - my / Cash Prepaid Rent 2,700 1 Balance CIF 12700 & Scandled with Camcanner

Cr.(B) 1,61,000 solution: (c) Trial Balonce an on May 31, 2019 No. Porticulars Dr. ($) Cash 1,55,900 Share Capital Equipment 26,000 Notes payable Office Supplies 6,800 Accounts payable Accounts Receivable 8.800 Service Revenue Utility Exponnes 560 Salories 10,400 Prepaid Rent 2,700 21,000 21 nisl vor coole 7,160 22,000 " Lhe ca scenned with CamScanner 2,11,160 2,11,160