Question

The following information is given for Randy Equestrian Services Inc. for the year ended December 31, 2018. The account balances (all of which had their normal balance of debit or credit) at the beginning of 2018 (January 1, 2018) were as follows:

Cash	$ 3,960
Accounts Payable	$ 42,660
Accounts Receivable	$ 7,920
Income Tax Payable	$ 27,180
Prepaid Supplies (Feed and Straw)	$ 50,040
Interest Payable	$ 4,860
Land (cost)	$ 300,600
Wages Payable	$ 25,560
Buildings (cost)	$ 207,000
Notes Payable (due in 2022)	$ 108,000
Accumulated Depreciation (Buildings )	$ 64,800
Common Shares	$ 270,000
Equipment	$ 102,600
Retained Earnings, 12/31/2017	$ 99,360
Accumulated Depreciation (Equipment)	$ 29,700

During the year ended December 31, 2018, the following transactions occurred:

1. Randy earned its revenues in a variety of ways. It rented stables to customers for $36,900 paid in cash. It rented its grounds to individual riders, groups, and show organizations for $75,240 paid in cash. Randy also provided horse grooming and training services to customers, all on credit, for $540,540.

2. Straw was purchased for $13,320 cash and debited to the prepaid supplies account.

3. Feed in the amount of $149,220 was purchased from suppliers on credit and debited to

   the prepaid supplies account.

4. There remains $28,080 of accounts receivable to be collected at December 31, 2018.

5. Wages payable at the beginning of 2018 were paid early in 2018. Wages were earned by

   employees in the amount of $201,600, of which $16,500 remained unpaid at end of 2018.

6. The income tax payable at the beginning of 2018 was paid early in 2018.

7. Payments of $173,000 were made to creditors for supplies previously purchased on

   credit.

8. One year’s interest at 6.5% was paid on the notes payable on July 1, 2018.

9. During 2018, Jon Hoth, a principal shareholder, purchased a diamond ring for his wife,

   Phoebe. The ring cost $17,000, and Jon used his personal credit to purchase it.

10. Property taxes were paid by cheque on the land and buildings in the amount of $34,000.

11. Randy purchased a truck for $34,000, paid $15,000 in cash and paid the rest of the price

    in common shares.

12. Dividends were declared and paid by cheque in the amount of $20,200.

Year End (December 31, 2018) Data

The following data is available for preparation of adjusting journal entries at December 31, 2018: . Supplies (feed and straw) in the amount of $48,400 remained unused at year-end.
. Annual depreciation on the buildings is $9,000.
. Annual depreciation on all the equipment is $10,500.

. Interest for six months at 6.5% per year on the note is unpaid and unrecorded at year-end. . Income taxes of $29,500 were unpaid and unrecorded at year-end.

Required:

1.Post the beginning balances at January 1, 2018 to T accounts. Prepare required journal entries for all transactions a to l and post the journal entries to the relevant T accounts. Add any new T accounts you need.

2.Prepare all required adjusting journal entries at December 31, 2018 and post the adjusting journal entries to the T accounts. Add any new T accounts you need.

3. Prepare, in proper financial statement format, a single step statement of earnings for the year ended December 31, 2018.

4. Prepare, in proper financial statement format, a statement of retained earnings for the year ended December 31, 2018.

5. Prepare, in proper financial statement format, a classified statement of financial position as at December 31, 2018.

Answer 1