Question

The following events apply to Paradise Vacations’s first year of operations: Acquired $20,000 cash from the issue of common stock on January 1, 2018. Purchased $800 of supplies on account. Paid $4,200 cash in advance for a one-year lease on office space. Earned $28,000 of revenue on account. Incurred $12,500 of other operating expenses on account. Collected $24,000 cash from accounts receivable. Paid $9,000 cash on accounts payable. Paid a $3,000 cash dividend to the stockholders. Information for Adjusting Entries There was $150 of supplies on hand at the end of the accounting period. The lease on the office space covered a one-year period beginning November 1. There was $3,600 of accrued salaries at the end of the period. Required a. Record these transactions in general journal form. b. Post the transaction data from the journal to ledger T-accounts. c. Prepare a trial balance. d-1. Prepare an income statement. d-2. Prepare a statement of changes in stockholders’ equity. d-3. Prepare a balance sheet. d-4. Prepare a statement of cash flows.

Answer 1

Paradise Vacations Journal Enteries Trans. Particulars i Cash a/c Dr. To Common Stock (Common Stock issued for cash) Debit in $ Credit in $ 20000 20000 2 800 Supplies a/c Dr. To Accounts Payable (Supplies on account) 800 3 Dr. 4200 Prepaid Rent a/c To Cash (1 year lease paid) 4200 I 4 Dr. 28000 Accounts Receivable a/c To Service Revenue (Revenue on account) 28000 5 Dr. 12500 Operating Expenses a/c To Accounts Payable (Expenses on account) 12500 24000 Cash a/c Dr. To Accounts Receivables (Cash from debtors) 24000 7 Dr. 9000 Accounts Payable a/c To Cash (Cash paid to creditors) 9000 8 Dr. 3000 Dividend a/c To Cash (Dividend paid) 3000

Adjusting Enteries Trans. Particulars 1 Supplies expense a/c Dr. To Supplies (Supplies Expensed) 800 - 150 Debit in $ Credit in $ 650 650 3600 Salaries expense a/c Dr. To Salaries Payable (Salary Expense accrued) 3600 Dr. 700 Rent expense a/c To Prepaid Rent (Rent Expensed) 700

Worksheet For the period ending Year 1 Particulars Cash Accounts Receivable Supplies Prepaid Rent Accounts Payable Salaries Payable Common Stock Dividend Service Revenue Operating Expenses Supplies expense Salaries expense Rent expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 27800 27800 4000 4000 800 650 150 4200 700 3500 4300 4300 3600 3600 20000 20000 3000 3000 28000 28000 12500 12500 650 650 3600 3600 700 700 52300 52300 4950 4950 55900 55900

28000 Statement of Income For the period ending Year 1 Service Revenue Less: Operating Expenses Supplies expense Salaries expense Rent expense Net Income 12500 650 3600 700 17450 10550 Total Statement of Changes in Stockholders Equity For the period ending Year 1 Common Retained Stock Earnings Beginning Bal. 0 Add: Capital introduced 20000 Add: Net Income 10550 Less:Dividends -3000 20000 7550 20000 10550 -3000 27550 10550 Statement of Cash flow For the period ending Year 1 Cashflow from Operating Activity Net Income Adjustments: Increase in Accounts Receivable -4000 Increase in Supplies -150 Increase in Prepaid Rent -3500 Increase in Accounts Payable 4300 Increase in Salary Payable 3600 Cash generated from Operating activity 250 10800 Cashflow from Investing Activity Cashflow from Financing Activity Common Stock issued 20000 Dividends paid -3000 Cash generated from Financing activity Net Increase in Cash Beginning Cash Balance Ending Cash Balance 17000 27800 27800

Balance sheet As at 31.12.Year 1 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Rent Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Liabilities 27800 Accounts Payable 4300 4000 Salaries Payable 3600 7900 150 3500 35450 Shareholder Equity Common Stock 20000 Retained Earnings 7550 27550 35450 Total Liabilities & Equity 35450 Total Assets