Question

January 1: Issued 700,000 shares of common stock for $9,800,000, which is the par value of the stock. January 10: Acquired equipment in exchange for $1,500,000 cash and a $3,000,000 note payable. The note is due in 10 years. February 10: Paid $31,200 for a business insurance policy covering the two-year period beginning on March 1. February 14: Purchased $950,000 of supplies on account. March 1: Paid wages of $199,000. March 15: Billed $2,590,000 for services rendered on account. April 3: Paid $130,000 of the amount due on the supplies purchased on February 14. April 17: Billed $1,800,000 for services rendered on account. May 1: Paid wages of $160,000. May 7: Collected $230,500 of the outstanding accounts receivable. May 8: Received bill and paid $98,700 for utilities. May 24 Paid $37,000 for sales commissions. June 4: Made the first payment on the note issued on January 10. The payment consisted of $18,000 of interest and $120,000 to be applied against the principal of the note. June 18: Billed customers for $669,000 of services rendered. June 29: Collected $500,000 on accounts receivable. July 10: Purchased $42,000 of supplies in cash. Aug 25: Paid $160,000 for administrative expenses. Sept 23: Paid $34,500 for warehouse repairs. October 1: Paid wages of $60,000. Nov 23: Purchased supplies for $550,000 on account. Dec 19 Collected $155,000 in advance for services to be provided in December and January of the following year. Dec 30: Declared and paid a $30,000 dividend to shareholders. Requirement c. Prepare an unadjusted trial balance as of December 31. (Exclude any accounts with a zero balance from the trial balance) Review the t-accounts prepared in Requirement b. Requirement d. Journalize and post adjusting entries to t-accounts. Begin by preparing the adjusting journal entries (AJES). (Record debits first, then credits. Exclude explanations from any journal entries) 1. AJE i Ten months of the insurance policy had expired by the end of the year. 2. AJE ji: Depreciation for the equipment is $225,000. 3. AJE iii. The company provided a portion of the services related to the advance collection of December 19. The company recognized $47,000 4. AJE iv. An additional $60,000 of interest had accrued on the note by the end of the year, as service revenue for services performed. 5. AJE v. Feng He Corporation accrued wages in the amount of $210,000.

Answer 1

Prepare journal entries as follows:

Credit Date Jan. 01 Debit $9.800,000 Account Title Cash (700,000 shares x $14) Common stock (700,000 shares < $1) Paid-in capital in excess of common stock $700.000 $9.100.000 $4.500.000 Equipment Note payable Cash $3,000,000 $1,500,000 Feb. 10 $31.200 Prepaid Insurance Cash $31,200 Feb. 14 $950,000 Supplies Accounts payable $950,000 Mar. 01 $199,000 Wages expense Cash $199,000 Mar. 15 $2,590,000 Accounts receivable Service revenue $2.590.000

Apr. 13 $130,000 Accounts payable Cash $130.000 Apr. 17 $1.800.000 Accounts receivable Service revenue $1,800,000 May. 01 $160,000 Wages expense Cash $160.000 May. 07 $230.500 Cash Accounts receivable $230,500 May.08 $98.700 Utilities expense Cash $98,700 May 24 $37,000 Commission expense Cash $37.000

Jun 4 Note payable Interest expense Cash $120,000 $18.000 $138.000 Jun 18 $669.000 Accounts receivable Service revenue $669,000 Jun 29 $500,000 Cash Accounts receivable $500,000 Jul. 10 $42.000 Supplies Cash $42.000 Aug. 25 $160,000 Advertisement expense Cash $160,000 Sep. 23 $34,500 Repair expense Cash $34.500

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Oct 01 $60,000 Wages expense Cash $60,000 Nov. 23 $550.000 Supplies Accounts payable $550.000 Dec. 19 Cash $155.000 Unearned revenue $155.000 Dec. 31 $30,000 Dividends Cash $30,000

Post the entries as follows:

Cash					Common stock
Jan. 01	$9,800,000	Jan. 10	$1,500,000				Jan. 01	$700,000
May. 07	$230,500	Feb. 10	$31,200
Jun. 29	$500,000	Mar. 01	$199,000				End. Bal.	$700,000
Dec. 19	$155,000	Apr. 13	$130,000
		May. 01	$160,000		Paid -in capital in excess of common stock
		May. 08	$98,700				Jan. 01	$9,100,000
		May. 24	$37,000
		Jun. 04	$138,000				End. Bal.	$9,100,000
		Jul. 10	$42,000
		Aug. 25	$160,000		Note payable
		Sep. 23	$34,500		Jun. 04	$120,000	Jan. 10	$3,000,000
		Oct. 01	$60,000
		Dec. 31	$30,000				End. Bal.	$2,880,000
End. Bal.	$8,065,100				Service revenue
							Mar. 15	$2,590,000
Equipment							Apr. 17	$1,800,000
Jan. 10	$4,500,000						Jun. 18	$669,000
End. Bal.	$4,500,000						End. Bal.	$5,059,000
Prepaid Insurance					Accounts payable
Feb. 10	$31,200				Apr. 13	$130,000	Feb. 14	$950,000
							Nov. 23	$550,000
End. Bal.	$31,200
							End. Bal.	$1,370,000
Supplies
Feb. 14	$950,000				Unearned revenue
Jul. 10	$42,000						Dec. 19	$155,000
Nov. 23	$550,000
							End. Bal.	$155,000
End. Bal.	$1,542,000
Wages expense					Utilities expense
Mar. 01	$199,000				May. 08	$98,700
May. 01	$160,000
Oct. 01	$60,000				End. Bal.	$98,700
End. Bal.	$419,000				repair expense
					Sep. 23	$34,500
Accounts receivable
Mar.1 5	$2,590,000	May. 07	$230,500		End. Bal.	$34,500
Apr. 17	$1,800,000	Jun. 29	$500,000
Jun. 18	$669,000				Commission expense
					May. 24	$37,000
End. Bal.	$4,328,500
					End. Bal.	$37,000
Advertisement expense					Interest expense
Jun. 4	$160,000				Jun. 4	$18,000
End. Bal.	$160,000				End. Bal.	$18,000
Dividend
Dec. 31	$30,000
End. Bal.	$30,000

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Prepare Unadjusted trial balance as follows:

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Credit Unadjusted Trial balance Debit $8.065,100 $4,328,500 $31,200 $1,542,000 $4,500,000 Cash Accounts receivable Prepaid insurance Supplies Equipment Accounts payable Common stock paid in capital in excess Note payable Service revenue Uneraned revenue Dividend Wages expense Advertisement expense Repair expense Commission expense Interest expense Utilities expense Total $1,370,000 $700,000 $9,100,000 $2.880,000 $5,059,000 $155.000 $30.000 $419.000 $160,000 $34,500 $37,000 $18,000 $98.700 $19,264,000 $19,264,000

Prepare Adjusted entries as follows:

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Tr. Credit Account Title Insurance expense Prepaid insurance ($31200/2 year) x 10/12 Debit $13,000 $13,000 $225,000 2 Depreciation expense |Accumulated depreciation Equipment $225,000 $47.000 3 Unearned revenue Service revenue $47.000 $60,000 4 Interest expense Interest payable $60,000 $210.000 5 Wages expense Wages payable $210,000

Prepare post adjusted t-accounts and Trial balance as follows:

Insurance expense $13,000 Accumulated deprectaion AJE AE $225,000 Adj. Bal. $13,000 Adj.bal. $225,000 Feb. 10 Prepaid Insurance $31,200 Uneamed revenue Dec. 19 $155,000 End. Bal. $31,200 End. Bal. $155,000 $13,000 $47.000 Adj. bal. S18,200 Adj. bal. AJE Depreciation expense $225,000 Service revenue Mar. 15 Apr. 17 Jun 18 $2,590,000 $1,800,000 $669,000 Adj. Bal. $225,000 End. Bal. $5,059,000 Interest expense $18,000 Jun.4 AJE $47,000 End. Bal. AJE S18.000 $60,000 Adj.bal. $5,106,000 Adj. bal. $ 78,000

Wages expense $419,000 Interest payable JAJE End. Bal. $60,000 AJE $210,000 Adj. bal. $60,000 Adj. bal. $629,000 Wage payable AJE $210,000 Adj. bal. $210,000 Credit Adjusted Trial balance Debit $8,065,100 $4,328,500 $18.200 $1,542,000 $4,500,000 Cash Accounts receivable Prepaid insurance Supplies Equipment Accounts payable Common stock paid in capital in excess Note payable Service revenue $1,370,000 $700,000 $9,100,000 $2,880,000 $5,106,000

$108.000 $60,000 Uneraned revenie Interest payable Dividend Wages expense Advertisement expense Repair expense Commission expense Interest expense Utilities expense Depreciation expense Accumulated depreciation Wages payable Insurance expense Total $30,000 $629,000 $160,000 $34,500 $37,000 $78,000 $98,700 $225,000 $225,000 $210,000 $13,000 $19,759,000 $19,759,000

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