Question

Question 5 [75 points) ABC Inc. began operations 2 years ago. Its adjusted account balances at May 31, 2014 are shown below. Shares were sold for $7,000 during May, 2014. Use this information to prepare the following: a. Income statement for the month ended May 31. b. Statement of changes in equity for the month ended May 31 c. Balance sheet at May 31 d. Closing entries. e. Post-closing trial balance When preparing closing entries, enter the dates in the format dd/mmm (io15/Jan), and use the numbers below as the description for the corresponding closing entry. 1. Close all temporary credit balance accounts to the income summary account 2. Close all temporary debit balance accounts to the income summary account. 3. Close the income summary (net income) to retained earnings. 4. Close the income summary (not loss) to retained eamings. 5. Close dividends to retained earnings. Enter the dates in the format dd/mmm (le 15/Jan). Balance 9,950 3,170 2,310 5.510 (select one) Income Statement (select one 30,310 3.510 6,370 Account Accounts receivable Accumulated depreciation, building Accumulated depreciation, equipment Advertising expense Advertising payable Bonds Payable (due December, 2017) Building Cash Commissions earned Consulting revenue eamed Depreciation expense, building. Depreciation expense, equipment Dividends Equipment Insurance expense interest expense Land Long-term notes payable Long-term investment in shares (select one Statement of Changes in Equity (select one) Share Retained Total Capital Earnings Equity 14,850 1.000 1,350 3,810 7.620 3.610 2.480 7.530 8.710 3,600

Answer 1

14,850 6,370 5,580 26,800 ABC Inc Income Statement For the month ended May 31, 2014 Revenues Consulting Revenue Earned Commissions Earned Rent Earned Total Revenues Expenses Rent expense Advertising expense Insurance expense Depreciation expense-Building Depreciation expense-Equipment Interest expense Total Expenses Net Income (Loss) 12,380 5,510 3,610 1,900 1,350 2,480 27,230 (430)

ABC Inc Statement of changes in equity For the month ended May 31, 2014 Beginning balance, May 1 Issue of new shares Net Income (Loss) Dividends Ending Balance, May 31 Share Capital Retained Earnings Total Equity 4,540 10,330 14,870 7,000 7,000 (430) (430) (3,810) (3,810) 11,540 6,090 17,630

ABC Inc Balance Sheet As of May 31, 2014 Assets Current Assets Cash Accounts Receivable Prepaid Insurance Total Current Assets 3,510 9,950 2,870 Liabilities & Stockholders Equity Current Liabilities Short-term Notes Payable Rent Payable Advertising Payable 16,330 Unearned Rent Total Current Liabilities 14,520 3,800 2,810 3,960 25,090 8,710 8,480 Fixed Assets Land Building Accumulated Depreciation-Building Equipment Accumulated Depreciation-Equipment Total Fixed Assets Long-term Liabilties 7,530 Long-term Notes Payable 30,310 Bonds Payable (due December 2017) (3,170) 27,140 Total Long-term Liabilties 7,620 Total Liabilties (2,310) 5,310 39,980 17,190 42,280 Other Assets Long-term Investments in shares Stockholders Equity 3,600 Share Capital Retained Earnings Total Stockholders Equity 59,910 Total Liabilities & Stockholders Equity 11,540 6,090 17,630 59,910 Total Assets

Credit ABC Inc Journal entries Date Account 31-May Consulting Revenue Earned Commissions Earned Rent Earned Income Summary Debit $ 14,850 $ 6,370 $ 5,580 $ 26,800 $ 27,230 31-May Income Summary Rent expense Advertising expense Insurance expense Depreciation expense-Building Depreciation expense-Equipment Interest expense $ $ $ $ $ $ 12,380 5,510 3,610 1,900 1,350 2,480 $ 430 31-May Retained Earnings Income Summary $ 430 $ 3,810 31-May Retained Earnings Dividends $ 3,810

ABC Inc Account Names Cash Accounts Receivable Prepaid Insurance Long-term Investments in shares Land Building Accumulated Depreciation-Building Equipment Accumulated Depreciation-Equipment Short-term Notes Payable Rent Payable Advertising Payable Unearned Rent Long-term Notes Payable Bonds Payable (due December 2017) Share Capital Retained Earnings Totals Post Closing TB Debit Credit 3,510 9,950 2,870 3,600 7,530 30,310 3,170 7,620 2,310 14,520 3,800 2,810 3,960 8,710 8,480 11,540 6,090 65,390 65,390