Question

Fast Deliveries, Inc. (FDI) was organized in December last year, and had limited activity last year. The resulting balance sheet at the beginning of the current year is provided below:

FAST DELIVERIES, INC. Balance Sheet at January 1
Assets:			Liabilities:
Cash	$10,900		Accounts Payable	$ 500
Accounts Receivable	800		Stockholders' Equity:
Supplies	400		Common Stock	11,000
			Retained Earnings	600
	______		Total Liabilities and Stockholders' Equity	______
Total Assets	$12,100			$12,100

Two employees have been hired, at a monthly salary of $2,200 each. The following transactions occurred during January of the current year.

	January	Transactions
1		$5,700 is paid for 12 months insurance starting January 1.
2		$4,200 is paid for 12 months of rent beginning January 1.
3		FDI borrows $30,000 cash from First State Bank at 6% annual interest; this note is payable in two years.
4		A delivery van is purchased using cash. The total cost was $24,000.
5		Stockholders contribute $6,000 of additional cash to FDI for its common stock.
6		Additional supplies costing $1,000 are purchased on account and received.
7		$600 of accounts receivable arising from last year's December sales are collected.
8		$400 of accounts payable from December of last year are paid.
9		Performed services for customers on account. Mailed invoices totaling $10,400.
10		$7,600 of services are performed for customers who paid immediately in cash.
16		$2,200 of salaries are paid for the first half of the month.
20		FDI receives $3,500 cash from a customer for an advance order for services to be provided later in January and in February.
25		$4,500 is collected from customers on account (see January 9 transaction).

Additional information for adjusting entries:
31a.	A $1,200 bill arrives for January utility services. Payment is due February 15.
31b.	Supplies on hand on January 31 are counted and determined to have cost $250.
31c.	As of January 31, FDI had completed 60% of the deliveries for the customer who paid in advance on January 20.
31d.	Accrue one month of interest on the bank loan. Yearly interest is determined by multiplying the amount borrowed   by the annual interest rate (expressed as 0.06).
	For convenience, calculate January interest as one-twelfth of the annual interest.
31e.	Assume the van will be used for 4 years, after which it will have no value. Thus, each year, one-fourth of the van's benefits will be used up, which implies annual depreciation equal to one-fourth of the van's total cost. Record depreciation for the month of January, equal to one-twelfth of the annual depreciation expense.
31f.	Salaries earned by employees for the period from January 16-31 are $1,100 per employee and will be paid on February 3.
31g.	Adjust the prepaid asset accounts (for rent and insurance) as needed.

Required:

1	Record journal entries for the transactions dated January 1-25 of the current year on the enclosed journal entry form.
2	Post each of the entries to the correct T-accounts on the enclosed T-account form.
3	Use the balances in the T-accounts as needed and the information given to calculate the adjusting jounral entries for January 31.
4	Record the adjusting journal entries dated January 31 of the current year on the enclosed journal entry form.
5	Post each of the entries to the correct T-accounts on the enclosed T-account form.
6	Total each T-account and record the ending balance on the correct side of the T-account.
7	Prepare the 3 Financial statements in good form using the final ending balances as of January 31, current year

Answer 1

Fast Deliveries Inc. Journal Enteries Date Particulars Jan-01 Prepaid Insurance a/c To Cash (12 months insurance paid) Dr. Debit in $ Credit in $ 5700 5700 Jan-02 Dr. 4200 Prepaid Rent a/c To Cash (12 months rent paid) 4200 Jan-03 Dr. 30000 Cash a/c To Note Payable (Cash borrowed) 30000 Dr. 24000 Jan-04 Delivery Van a/c To Cash (Delivery Van purchased) 24000 Jan-05 6000 Cash a/c To Common Stock (Common stock issued for cash) 6000 1000 Jan-06 Supplies a/c Dr. To Accounts Payable (Supplies on account) 1000 Jan-07 Dr. 600 Cash a/c To Accounts Receivable (Cash from debtors) 600

Debit in $ Credit in $ Date Jan-08 Dr. 400 Particulars Accounts Payable a/c To Cash (Creditors paid) 400 10400 Jan-09 Accounts Receivable a/c Dr. To Service Revenue (Services performed on account) 10400 Jan-10 7600 Cash a/c Dr. To Service Revenue (Services performed for cash) 7600 Jan-16 Dr. 2200 Salaries Expense a/c To Cash (Salaries paid) 2200 Jan-20 Dr. 3500 Cash a/c To Unearned Revenue (Advance from client) 3500 Jan-25 4500 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 4500

Adjusting Enteries Date Particulars Jan-31 Utility Expense a/c Dr. To Accounts Payable (Expense on account) Debit in $ Credit in $ 1200 1200 1150 Jan-31 Supplies Expense a/c Dr. To Supplies (Supplies Expensed) 400 + 1000 - 250 1150 2100 Jan-31 Unearned Revenue a/c Dr. To Service Revenue (Revenue recognized) 3500 x 60% = 2100 2100 150 Jan-31 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 30000 x 6% x 1/12 150 625 Jan-31 Depreciation Expense a/c Dr. To Accum. Depre - Van (To record depreciation)24000 / (4 x 12) 625 Dr. 2200 Jan-31 Salary Expense a/c To Salary Payable (Salary accrued) 1100 X 2 2200 Jan-31 Insurance Expense a/c Dr. To Prepaid Insurance (Insurance Expensed) 5700/12 475 350 Jan-31 Rent Expense a/c Dr. To Prepaid Rent (Insurance Expensed) 4200/12 350

20100 Statement of Income For the period ending Jan 31 Service Revenue Less: Salaries Expense 4400 Supplies Expense 1150 Interest Expense 150 Depreciation Expense 625 Utility Expense 1200 Insurance Expense 475 Rent Expense 350 Net Income 8350 11750 Statement of Retained Earnings For the period ending Jan 31 Beginning Balance 600 Net Income 11750 12350

6050 Statement of Financial Position As at April 30 Assets Amount in $ Amount in $ Liabilities Amount in $ Amount in $ Current Assets Current Liabilities Cash 26600 Accounts Payable 2300 Accounts Receivable 6100 Salary Payable 2200 Supplies 250 Interest Payable 150 Prepaid Insurance 5225 Unearned Revenue 1400 Prepaid Rent 3850 42025 Non Current Liabilities Non Current Assets Note Payable 30000 Delivery Van 24000 Accum. Depre - Van -625 23375 Shareholders Equity Common Stock 17000 Retained Earnings 12350 29350 Total Assets 65400 Total Liabilities & Equity 65400

Unearned Revenue Cash 3500 Bal. Note Payable Common Stock Accounts Receivable Service Revenue Unearned Revenue Accounts Receivable Bal. 5700 4200 24000 400 2200 3500 3500 Cash 10900 Prepaid Insurance 30000 Prepaid Rent 6000 Delivery Van 600 Accounts Payable 7600 Salaries Expense 3500 4500 Bal. 63100 3500 30000 Note Payable Cash 30000 30000 Bal. 26600 63100 30000 Common Stock Accounts Receivable 800 Cash 10400 Cash Bal. Service Revenue Bal. Bal. 600 4500 6100 11200 Bal. 11000 6000 17000 17000 Cash 17000 11200 600 Retained Earnings Bal. 600 600 Bal. Supplies 400 1000 Bal. 1400 Bal. Accounts Payable 600 1400 1400

Cash Prepaid Insurance 5700 Bal. 5700 Service Revenue Accounts Receivable 18000 Cash 18000 Bal. 5700 5700 10400 7600 18000 Cash Prepaid Rent 4200 Bal. Cash Salaries Expense 2200 Bal. 2200 4200 4200 2200 2200 4200 Cash Delivery Van 24000 Bal. 24000 24000 24000 Cash Accounts Payable 400 Bal. Supplies 1100 1500 500 1000 Bal. 1500