Question

Part (B) Accounting Cycle Comprehensive Problem [75 marks in total]

Best solutions, Inc. completed the following transactions during January 2019:

a. Shareholders invested in the business $60,000 cash and a delivery truck valued at $72,000 in

exchange for common stock.

b. Purchased supplies for $3000 cash.

c. Paid $5,500 for a one-year insurance policy, effective January1.

d. Performed delivery services for a customer and received $4,000 cash.

e. Completed a large delivery job for a customer on account for $15,000.

f. Paid $10,000 for employee salaries.

g. Performed delivery services for customers and received $110,000 cash.

h. Collected $5,000 in advance for delivery service to be performed later.

i. Collected $7,000 cash from a customer on account.

j. Purchased fuel for the truck, paying $3,600 with a company credit card (Credit accounts

payable).

k. Performed delivery services on account, $9,500.

l. Paid office rent $2,400.

m. Paid $2,000 for accounts payable.

n. Paid cash dividends of $18,000.

Requirements:

1. Record each transaction in the journal. Key each transaction by its letter (Explanations are not

required).

[28 marks]

2. Post the transactions that you recorded in requirement 1 to the ledger accounts using T-accounts. The ledger for Best solutions contains the following accounts:

Cash

Accounts receivable Supplies

Prepaid insurance Delivery truck

Service revenue Salaries expense Depreciation expense Insurance expense Fuel expense

3

Accumulated depreciation Accounts payable Salaries payable Unearned service revenue Common stock

Retained earnings Dividends

rent expense supplies expense

3. Prepare a trial balance at January 31 on a worksheet

4. Enter the following adjustments on the worksheet.

a. Accrued but unpaid employee salaries were $3,500.

b. Depreciation expense for the month was $250.

c. Prepaid insurance expired, $500.

d. An inventory count shows $750 of supplies on hand at January 31. e. Unearned service revenue earned during January, $1,750.

5. Complete the worksheet showing:

- The adjusted trial balance 10 marks

- The income statement for the month ended January 31, 2019 5 marks

- The balance sheet on the same date. [ 5 marks]

Answer 1

1.

a	Cash	60,000
	Delivery truck	72,000
	To Common Stock		1,32,000
b	Supplies	3000
	To Cash		3000
c	Prepaid Insurance	5500
	To Cash		5500
d	Cash	4000
	To Service Revenue		4000
e	Accounts Receivable	15000
	To Service Revenue		15000
f	Salaries Expense	10000
	To Cash		10000
g	Cash	110000
	To Service Revenue		110000
h	Cash	5000
	To Unearned Service Revenue		5000
i	Cash	7000
	To Accounts Receivable		7000
j	Fuel expense	3600
	To Accounts Payable		3600
k	Accounts Receivable	9500
	To Service Revenue		9500
l	Rent Expense	2400
	To Cash		2400
m	Accounts Payable	2000
	To Cash		2000
n	Dividends	18000
	To Cash		18000

2.

Cash Account
Particular	Amount	Particular	Amount
To Common Stock	60,000	By Supplies	3000
To Service Revenue	4000	By Prepaid Insurance	5500
To Service Revenue	110000	By Salaries Expense	10000
		By Rent Expense	2400
To Unearned Service Revenue	5000	By Accounts Payable	2000
		By Dividend	18000
To Accounts Receivable	7000	By Balance b/d	145100
	186000		186000
Accounts Receivable
Particular	Amount	Particular	Amount
To Service Revenue	15000	By Cash	7000
To Service Revenue	9500
		By Balance b/d	17500
	24500		24500
Supplies
Particular	Amount	Particular	Amount
To Cash	3000
		By Balance b/d	3000
	3000		3000
Accounts Payable
Particular	Amount	Particular	Amount
To Cash	2000	By Fuel expense	3600
To Balance b/d	1600
	3600		3600
Unearned Service Revenue
Particular	Amount	Particular	Amount
		By Cash	5000
To Balance b/d	5000
	5000		5000
Common Stock
Particular	Amount	Particular	Amount
		By Cash	60,000
To Balance b/d	1,32,000	By Delivery truck	72,000
	132000		132000
Service Revenue
Particular	Amount	Particular	Amount
		By Cash	4000
To Balance b/d	138500	By Accounts Receivable	15000
		By Cash	110000
		By Accounts Receivable	9500
	138500		138500
Salaries Expense
Particular	Amount	Particular	Amount
To Cash	10000
		By Balance b/d	10000
	10000		10000
Rent Expense
Particular	Amount	Particular	Amount
To Cash	2400
		By Balance b/d	2400
	2400		2400
Delivery truck
Particular	Amount	Particular	Amount
To Common Stock	72,000
		By Balance b/d	72000
	72000		72000
Prepaid insurance
Particular	Amount	Particular	Amount
To Cash	5,500
		By Balance b/d	5500
	5500		5500
Fuel Expense
Particular	Amount	Particular	Amount
To Accounts Payable	3,600
		By Balance b/d	3600
	3600		3600
Dividend
Particular	Amount	Particular	Amount
To Cash	18,000
		By Balance b/d	18000
	18000		18000

3.

Trial Balance
	Debit		Credit
Cash Account	145100
Accounts Receivable	17500
Supplies	3000
Delivery truck	72000
Prepaid insurance	5500
Accounts Payable			1600
Unearned Service Revenue			5000
Common Stock			132000
Dividend	18000
Service Revenue			138500
Salaries Expense	10000
Fuel Expense	3600
Rent Expense	2400
		277100	277100

4.

Adjustment Entries

a	Salaries Expense	3500
	To Salaries payable		3500
b	Depreciation Expense	250
	To Accumulated depreciation		250
c	Insurance Expense	500
	To Prepaid Insurance		500
d	Supplies Expense	2250
	To Supplies		2250
	(3000-750)
e	Unearned Service Revenue	3250
	To Service Revenue		3250
	(5000-1750)

5.

Adjusted Trial Balance
	Dr	Cr
Cash	145100
Accounts Receivable	17500
Prepaid insurance	5000
Supplies	750
Delivery truck	72000
Accumulated depreciation		250
Accounts Payable		1600
Salaries payable		3500
Unearned Service Revenue		1750
Common Stock		132000
Dividend	18000
Service Revenue		141750
Interest earned
Depreciation Expense-automobile
Depreciation Expense	250
Salaries Expense	13500
Fuel Expense	3600
Rent Expense	2400
Supplies Expense	2250
Insurance Expense	500
	280850	280850

F G H Statement of Income For the month ended 31-01-2019 Revenue Service Revenue 141750 141750 Expenses Depreciation Expense Salaries Expense Fuel Expense Rent Expense Supplies Expense Insurance Expense Total Expenses 250 13500 3600 2400 2250 500 22500 Net Income 119250 Statement of Retained Earnings Beginning Balance Net Income Dividends 0 119250 -18000 Ending balance 101250

F G Balance Sheet As At 31.01.2019 Assets Cash 145100 Accounts Receivable 17500 Prepaid insurance 5000 Supplies 750 Total Current Asset 168350 Delivery truck Accumulated depreciation 72000 250 71750 240100 Total Assets Liabilities Accounts Payable Salaries payable 1600 3500 Unearned Service Revenue 1750 Total Current Liabilities 6850 Total Liabilities 6850 Stockholders Equity Common Stock 132000 Retained Earnings 101250 Total Stockholders Equity 233250 Total Liabilities and Stockholders Equity 240100

(Due to excess characters last two sub parts uploaded as image)

Hope You Understood.

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