Question

Question 3

(50 marks)

Barbara Imagine created Imagine That, a proprietorship, in 2016. Imagine That’s unadjusted T-accounts had the following December 31, 2018 balances:

Cash			Accounts Receivable			Supplies
Bal. 82,000			Bal. 127,000			Bal. 13,000

Office Furniture			Accumulated Amortization, Office Furniture			Accounts Payable
Bal. 166,000				Bal. 31,000			Bal. 43,000

Bank Loan			Unearned Service Revenue			Salary Payable
	Bal. 115,000			Bal. 1,000

Barbara Imagine, Capital			Barbara Imagine, Withdrawals			Service Revenue
	Bal. 118,000		Bal. 157,000				Bal. 375,000

Supplies Expense			Salary Expense			Advertising Expense
			Bal. 103,000			Bal. 25,000

Amortization Expense, Office Furniture			Interest Expense
			Bal. 10,000

Accounts that required adjustments at December 31, 2018 were comprised of the following:

1. Amortization for the year was $ 16,500.
2. Supplies on hand at December 31, 2018 were $ 5,000.
3. Bonuses accrued at year end were $ 43,000 and were going to be paid in March, 2019.
4. Imagine That signed a contract on December 31, 2018. The contract stated that Imagine That was to provide interior design work for a shopping mall that was going to be open in June 2019. Imagine That was given a cheque for $ 250,000.
5. On December 31, 2018, Imagine That received a $ 6,000 invoice regarding an ad that it placed on the internet. The invoice will be paid in February 2019.

Required:

1. Record the above T-account information on a worksheet trial balance column. Then, record the adjusting journal entries onto the worksheet, and complete the worksheet. Identify each adjusting journal entry by the numeral corresponding to the data given.
2. In a journal, record the adjusting and closing journal entries. Provide explanations.
3. Prepare Imagine That’s December 31, 2018 income statement.
4. Prepare Imagine That’s December 31, 2018 statement of owner’s equity.
5. Prepare Imagine That’s December 31, 2018 balance sheet.
6. Prepare Imagine That’s December 31, 2018 post-closing trial balance.

Answer 1

Imagine That, Accounts Receivable 127000 Bal Unearned Service Bal Cash 82000 250000 Bal 332000 332000 332000 Bal 127000 127000 127000 Supplies 13000 Supplies Expense Office Furniture 166000 Bal 8000 Bal 5000 13000 166000 166000 13000 166000 Accumulated Amortization, Office Furniture Bal 31000 Amortization Expense 16500 47500 47500 47500 Accounts Payable Bal Advertising Expense 49000 49000 43000 6000 Bal Bal 49000 Bank Loan Bal 115000 Unearned Service Revenue Bal Cash 251000 251000 1000 250000 Bal Bal 115000 115000 115000 251000

Salary Payable Barbara Imagine, Capital Bal Bal 118000 43000 Bal Salary Expense 43000 43000 Bal 118000 118000 43000 118000 Service Revenue Barbara Imagine, Withdrawals 157000 Bal Bal 375000 Bal 157000 157000 375000 375000 157000 375000 Supplies Expense 8000 Supplies Bal Salary Payable Salary Expense 103000 43000 Bal 146000 Bal 8000 8000 8000 146000 146000 Amortization Expense, Off.Furn, Accumulated Amortiz 16500 Advertising Expense Bal 25000 Accounts Payable 6000 Bal 31000 Ball 31000 31000 16500 16500 16500 Interest Expense 10000 Bal Bal 10000 10000 10000

Adjusting Enteries Date Particulars 31.12.2018 Amortization Expense, Off.Furn, a/c Dr. To Accumulated Amortization, Office Furniture (To record amortization) Debit in $ Credit in $ 16500 16500 Dr. 8000 31.12.2018 Supplies Expense a/c To Supplies (Supplies expensed) 8000 Dr. 43000 31.12.2018 Salary Expense a/c To Salary Payable (Bonus accrued) 43000 250000 31.12.2018 Cash a/c To Unearned Revenue (Advance from client) 250000 Dr. 6000 31.12.2018 Advertising Expense a/c To Accounts Payable 6000 Closing Enteries Date Particulars 31.12.2018 Income Summary a/c Dr. To Supplies Expense To Salary Expense To Amortization Expense, Off.Furn, To Advertising Expense To Interest Expense (Expense accounts closed) Debit in $ Credit in $ 211500 8000 146000 16500 31000 10000 Dr. 375000 31.12.2018 Service Revenue a/c To Income Summary (Revenue accounts closed) 375000 Dr. 163500 31.12.2018 Income Summary a/c To Barbara Imagine, Capital (Profits Transferred) 163500 157000 31.12.2018 Barbara Imagine, Capital a/c Dr. To Barbara Imagine, Withdrawals (Withdrawals charged) 157000

375000 Statement of Income For the period ending 31.12.2018 Service Revenue Less: Supplies Expense Salary Expense Amortization Expense, Off.Furn, Advertising Expense Interest Expense Net Income 8000 146000 16500 31000 10000 211500 163500 Statement of Owner's Equity For the period ending 31.12.2018 Barbara Imagine, Capital Net Income 118000 163500 281500 - 157000 124500 Barbara Imagine, Withdrawals

Amounts in $ Amounts in $ Balance sheet As at 31.12.2018 Assets Current Assets Cash Accounts Receivable Supplies Amounts in $ Amounts in $ Liabilities Current Liabilities 332000 Accounts Payable 127000 Unearned Service Revenue 5000 464000 Salary Payable 49000 251000 43000 343000 Non Current Assets Office Furniture Accumulated Amortiz 115000 166000 -47500 Non Current Liabilities Bank Loan 118500 Owner's Equity Barbara Imagine, Capital 582500 Total Liabilities & Equity 124500 582500 Total Assets

Post closing Trial Balance For the period ending 31.12.2018 Particulars Debit in $ Credit in $ Cash 332000 Accounts Receivable 127000 Supplies 5000 Office Furniture 166000 Accumulated Amortization, Office Furniture 47500 Accounts Payable 49000 Unearned Service Revenue 251000 Salary Payable 43000 Bank Loan 115000 Barbara Imagine, Capital 124500 Total Assets 630000 630000