Question

Chapter 3 HiTech Communications example continued Trial balance as of March 31, 2013, before adjustments Credit Debit $16.600 6,500 1,200 4.500 $500 9.000 RE Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Unearned Service Revenue Notes Payable Common Stock Dividends Service Revenue Salaries Expense Utilities Expense Totals Adjustments at the end of March 3.000 12,000 500 12.100 1,800 5.200 $36.600 $36,600 1. HiTech had performed $1.500 of advertising services for which it had not yet billed the customer 2. The note payable for $3,000 that HiTech siened on March 2 required it to pay interest at an annud rate of 8% 3. HiTech paid its weekly salaries on March 26. Salaries are $360 per day. HiTech will not pay salaries again until April 2. However, employees worked on March 29, March 30, and March 31. 4. HiTech's trial balance shows that a customer paid $9.000 in advance for services to be performed at a later date. Based on HiTech's analysis of work performed during March, it is determined that $3,300 of revenue has been earned. 5. HighTech's trial balance shows a balance of $6,500 in the Supplies account. However, an inventory count at the close of business on March 31 determined that supplies on hand were $1,200. 6. HiTech's trial balance shows a balance of $1,200 in the Prepaid Insurance account related to a 6- month insurance policy purchased at the beginning of March. 7. HiTech's trial balance shows that $4,500 of equipment was purchased. HiTech computed depreciation expense as $125 per month. Required: 4. Prepare the adjusting entries 5. Post adjusting entries to the ledger (T-accounts) 6. Prepare the adjusted trial balance 7. Prepare the financial statements 8. Prepare the closing entries 9. Post closing entries to the ledger 10. Prepare the post-closing trial balance The Review Problem at the end of Chapter 3 is similar. You can use it for additional practice completing the steps of the accounting cycle at the end of the accounting period.

Answer 1

Hitech Communications Adjusting entries Date Account 1 Accounts Receivable Service Revenue Credit Calculation Debit $ 1,500 $ 1,500 2 $ 250 Interest expense Interest Payable $ 250 3 $ 1,080 =360*3 days Salaries expense Salaries payable $ 1,080 4 $ 3,300 Uneanred Service Revenue Service Revenue $ 3,300 5 $ 5,300 =6,500-1,200 Supplies expense Supplies $ 5,300 $ 200 =1,200/ 6 months Insurance expense Prepaid Insurance $ 200 $ 125 $ 125 7 Depreciation expense Accumulated Depreciation - Equipment Closing entries CJE 1 Service Revenue Income Summary $ 16,900 $ 16,900 $ 13,955 CJE 2 Income Summary Salaries expense Utilities expense Supplies expense Insurance expense Depreciation expense Interest expense $ $ $ $ $ $ 2,880 5,200 5,300 200 125 250 $ 2,945 CJE 3 Income Summary Retained Earnings $ 2,945 $ 500 CJE 4 Retained Earnings Dividends $ 500

Hitech Communications T Accounts Date Debit Date Cash Unadj bal $ 16,600 Credit Credit Credit Credit Date Debit Date Accounts Receivable Unadj bal $ 300 1 $ 1,500 Date Debit Date Supplies Unadj bal $ 6,500 5 Date Debit Date Prepaid Insurance Unadj bal $ 1,200 6 $ 5,300 $ 200 Bal. Bal. Bal. Bal. $ 16,600 Equipment Unadj bal $ 4,500 $ 1,800 Accum. Depr. - Equipment Unadj bal $ 7 $ $ 1,200 Accounts Payable Unadj bal $ $ 1,000 Uneanred Service Revenue Unadj bal $ 9,000 $ 3,300 500 . 125 4 Bal. $ 125 Bal. $ 5,700 4,500 Salaries payable Unadj bal $ 3 $ Bal. $ Interest Payable Unadj bal $ 2 $ Bal. $ 500 Notes payable Unadj bal $ 3,000 . 250 1,080 1,080 Bal. $ 250 $ 3,000 Bal. $ Common Stock Unadj bal $ Bal. Dividends 500 CJE4 Retained Earnings CJE 3 $ 500 12,000 $ 2,945 Unadj bal $ $ 500 Income Summary $ 13,955 CJE1 $ 2,945 CJE2 CJE 3 $ 16,900 CJE4 $ 2,445 Bal. Bal. $ 12,000 Bal. Service Revenue Salaries expense Unadj bal $ 12,100 Unadj bal $ 1,800 i $ 1,500 3 $ 1,080 $ 16,900 4 $ 3,300 CJE 2 Bal. $ - Utilities expense Unadj bal $ 5,200 Supplies expense Unadj bal $ . 5 $ 5,300 CJE 2 CJE1 $ 2,880 CJE 2 $ 5,200 $ 5,300 Ś $ - Bal. Bal. Insurance expense Unadj bal $ . 6 $ 200 CJE 2 Bal. $ . Depreciation expense Unadj bal $ 7 $ 125 CJE 2 $ Bal. $ - Interest expense Unadj bal $ - 2 $ 250 CJE 2 $ 200 125 $ 250 Bal. $ Bal. $ . _ Bal. $ .

Hitech Communications Account Names Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation - Equipment Accounts Payable Uneanred Service Revenue Salaries payable Interest Payable Notes payable Common Stock Retained Earnings Dividends Service Revenue Salaries expense Utilities expense Supplies expense Insurance expense Depreciation expense Interest expense Totals Adjusted TB Debit Credit 16,600 1,800 1,200 1,000 4,500 125 500 5,700 1,080 250 3,000 12,000 Post Closing TB Debit Credit 16,600 1,800 1,200 1,000 4,500 125 500 5,700 1,080 250 3,000 12,000 2,445 500 16,900 2,880 5,200 5,300 200 125 250 39,555 39,555 25,100 25,100

16,900 Hitech Communications Income Statement For the Period Ended March 31, 2013 Revenues Service Revenue Expenses Salaries expense Utilities expense Supplies expense Insurance expense Depreciation expense Interest expense Total Expenses Net Income 2,880 5,200 5,300 200 125 250 13,955 2,945 Statement of Retained Earnings For the Period Ended March 31, 2013 Beginning balance Net Income Less Dividends Ending Balance 2,945 (500) 2,445

Hitech Communications Statement of Changes in Equity For the Period Ended March 31, 2013 Common Stock Retained Earnings Total Equity 12,000 Beginning balance Issue of new shares Net Income Less Dividends Ending Balance 2,945 (500) 2,445 12,000 2,945 (500) 14,445 12,000 Note Assuming common stock of $12,000 is issued during the year If not, please put it in Beginning Balance

Hitech Communications Balance Sheet As of March 31, 2013 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Insurance 500 5,700 Liabilities & Stockholders Equity Liabilities 16,600 Accounts Payable 1,800 Uneanred Service Revenue 1,200 Salaries payable 1,000 Interest Payable Notes payable 20,600 Total Liabilties 1,080 250 3,000 10,530 Total Current Assets Property, Plant & Equipment Equipment Accumulated Depreciation - Equipment Total Property, Plant & Equipment Stockholders Equity 4,500 Common Stock (125) Retained earnings 4,375 Total Stockholders Equity 12,000 2,445 14,445 Total Assets 24,975 Total Liabilities & Stockholders Equity 24,975