Question

ACC212- PRACTICE COMPREHENSIVE PROBLEM In 2019, Lane King created the Chaos Coordination Company which provided playground equipment and design for Day Care Centers and Elementary Schools. In 2019, the following transactions occurred: 1. 1/1/2019 Stockholders invested $450,000 in cash in the business in exchange for common stock. 2. 1/1/2019 Purchased Equipment for $10,000 in Cash 3. 2/1/2019 Paid $24,000 for One year Office Rent 4. 2/1/2019 Pre-paid $5,280 for two years of advertising in the local newspaper. 5. 2/1/2019 Purchased $7,400 in Office Supplies on Account 6. 3/1/2019 Purchased Business Insurance for an annual cost of $6,900 7. 4/1/2019 Paid S0% of Office Supplies bill purchased on account in transaction #5 8. 8/1/2019 Received a $17S,000, 4 year note payable from Chase Bank with a 4.5% interest rate. Interest is payable semi-annually (1/31 and 7/31) 9. Earned $690,000 for services and sales provided: a. $225,000 was received by customers in cash b. $465,000 was billed to customers 10. Paid salaries for employees of $144,500 11. Received a cash advance for Order of $85,000 not yet produced 12. Paid Utilities of $12,200 13. Received $385,200 in cash for customers from billed transactions 14. Declared and Paid a $2,000 dividend These are transactions for the full vear- just put a date of 12/31 Step One: Journalize the above transactions, post to the ledger (T-Accounts) and prepare a trial balance. Step Two: After reviewing the trial balance, prepare any adjusting entries necessary for the year (note, pay special attention to dates). In addition, the following adjustments were noted: Employees salaries for the last week of December and not yet paid total $22,200 After reviewing the A/R aging, management estimated that approximately $32,600 will not be collectible Utilities Expense incurred but not recorded totaled $2,750 Equipment is depreciated on a straight line basis with $1,000 salvage over 4 years • A physical count of office supplies noted a balance of $725 • Services provided but not yet billed totaled $37,400 Post all adjusting entries to T-Accounts Step Three: Prepare an adjusted Trial balance after posting all of the above entries. Step Four: Prepare an Income Statement, Statement of Retained Earnings and Balance Sheet for the 2019 year. Step Five: Prepare closing entries for the 2019 year. Step 6: Prepare a post-closing trial balance for Chaos Coordination Company.

Answer 1

Answered first four steps

Step 1 and Step 2 Journal entries and adjustment entries

Date		Accounts	Ref.	Debit	Credit
2019
Jan	1	Cash		$ 450,000
		Capital			$ 450,000
		Cash brought in as capital in exchange for common stock
		Equipment		$   10,000
		Cash			$   10,000
		Purchased equipment for cash
	2	Office Rent		$   24,000
		Cash			$   24,000
		Office rent paid in cash
		Prepaid Advertisements		$     5,280
		Cash			$     5,280
		Prepaid for advertisements for 2 years in local newspaper
		Office supplies		$     7,400
		Accounts payable			$     7,400
		Office supplies purchased on account
	3	Insurance		$     6,900
		Cash			$     6,900
		Purchase business insurance
	4	Accounts payable		$     3,700
		Cash			$     3,700
		Paid 50% of office supplies purchsed on account
	8	Bank		$ 175,000
		4.5% Chase Bank Note			$ 175,000
		Received 4 year Note payable form Chase bank
July	31	Interest		$     3,938
		Bank			$     3,938
		Interest paid semi annually
Dec	31	Interest		$     3,281
		Interest payable			$     3,281
		Interest accrued but not paid (5 months interest)
		Cash		$ 225,000
		Sales			$ 225,000
		Cash sales
		Accounts Receivable		$ 465,000
		Cash			$ 465,000
		Credit sales
		Salaries		$ 144,500
		Cash			$ 144,500
		Paid salaries
		Cash		$   85,000
		Advance from customers			$   85,000
		Received advance from customers for orders not yet produced
		Utilities		$   12,200
		Cash			$   12,200
		Paid Utilities
		Cash		$ 385,200
		Account Receivables			$ 385,200
		Cash received from accounts receivables
		Dividend		$     2,000
		Cash			$     2,000
		Declared and paid dividend
		Advertisements		$     2,640
		Prepaid advertisement			$     2,640
		Advertisement cost accrued
		Salaries		$   22,200
		Salaries payable			$   22,200
		Adjustment entry for salaries payable
		Bad Debts		$   32,600
		Accounts receivables			$   32,600
		Bad debts recognised
		Depreciation		$     2,250
		Equipment			$     2,250
		Depreciation charged
		Supplies expense		$     6,675
		Office supplies			$     6,675
		Office supplies utilised during the year
		Accounts Receivables		$   37,400
		Fees earned			$   37,400
		Service provided not yet billed

Step 3 Trial Balance

A A A Trial Blance (after adjustments) Particulas Debit Credit Cash $ 471,620 Capital $ 450,000 Equipment 7,750 Office Rent 24,000 Prepaid Advertisements 2,640 Office supplies 725 Accounts payable $ 3,700 Insurance 6.900 Bank $ 171,063 4.5% Chase Bank Note $ 175,000 Interest 7,219 Interest payable $ 3,281 Sales $ 225,000 Accounts Receivables $ 84,600 Salaries $ 166,700 Advance from customers $ 85,000 Utilities 12,200 Dividend 2,000 Advertisements Salaries payable $ 22,200 Bad Debts 32,600 Depreciation 2,250 Supplies expense 6,675 Fees earned $ 37,400 Total $1,001,581 $1,001,581 67 2,640 7 A A EA

Step 4

Income Statement Particulars Gross Revenue Amount $262,400 Expenses Office Rent Insurance Interest Salaries Utilities Advertisements Bad Debts Depreciation Supplies expense Total expenses $ 24,000 $ 6,900 $ 7,219 $ 166,700 $ 12,200 $ 2,640 $ 32.600 $ 2,250 $ 6,675 $ 261.184 Net Profit(loss) $ 1,216 Statement of Retained earnings Particulars Amount Opening retained earnings Net income $ 1 216 Less Dividend (2000) Retained earnings at 31st Dec ED A en (784) Sheet15 Sheet16 et Sheet 19 le 9

Home Insert Page Layout Formulas Data Review View Developer Balance Sheet Assets Cash Equipment Prepaid Advertisements Office supplies Amount Liabilities $ 471,620 Capital $ 7,750 Retained earnings $ 2,640 Accounts payable $ 725 Salaries payable $ 171,063 4.5% Chase Bank Note $ 84,600 Interest payable Advance from customers Amount $450,000 $ (784) $ 3,700 $ 22,200 $175,000 $ 3,281 $ 85,000 Bank Accounts Receivables $ 738,398 $ 738,398 - Sheet14 Sheet15 Sheet16. Sheet17 Sheet18 Sheet19 Sheet20 Sh @ @ 9 Gaw