Question

Required information Exercise 3-21A Complete the accounting cycle (LO3-3, 3-4, 3-5, 3-6) On January 1, 2021, the general ledger of Dynamite Fireworks includes the following account balances: Credit Accounts Cash Accounts Receivable Supplies Land Accounts Payable Common Stock Retained Earnings Totals Debit $ 24,300 5,700 3,600 55,000 $ 3,700 70,000 14,900 $88,600 $88,600 During January 2021, the following transactions occur: January 2 Purchase rental space for one year in advance, $7,500 ($625/month). January 9 Purchase additional supplies on account, $4,000. January 13 Provide services to customers on account, $ 26,000. January 17 Receive cash in advance from customers for services to be provided in the future, $4,200. January 20 Pay cash for salaries, $12,000. January 22 Receive cash on accounts receivable, $ 24,600. January 29 Pay cash on accounts payable, $4,500. Exercise 3-21A Part 6 6. Record closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the entry to close the revenue accounts. Note: Enter debits before credits. General Journal Debit Credit Date January 31, 2021 Record entry Clear entry View general journal

Answer 1

Ans. Journal entry in the books of dynamits fireworks

Jan 2                      Advance for Rental Space A/c 7500

                                   To Cash A/c                           7500

Jan 9                      Supplies A/c Dr            4000

                                    To Cash A/c              4000

Jan 13                   Account receivable A/c Dr 26000

                                  To Services to customer A/c 26000

     

                         Service to customer A/c       26000

                              To Profit and loss A/c            26000

Jan 17              Cash    A/c    Dr    4200

                         To Advance for service A/c      4200

Jan 20             Salaries A/c        Dr      12000

                         To Cash A/c                      12000

  

                      Profit and Loss A/c   Dr 12000

                          To Salaries A/c               12000

Jan 22            Cash A/c Dr.        24600

                        To Account receivable A/c 24600

Jan 29            Account payables A/c   Dr     4500

                           To Cash A/c                         4500

Jan 31          Profit and Loss A/c Dr .        625

                       To Advance for rent A/c               625

                (Being rental for jan 2021 is charges)

                                                Legders Accounts

                                                   Cash Account

To Op. Balance                            24300           By Advance rentals           7500

To Advance from customer 4200          

To Account receivable    24600          By Salaries                       12000

                                                                     By Account payable            4500

                                                                     By Balance C/d                  29100

                                                 53100    53100                        

                                                      Account receivable A/c

To Op Balance                                5700     By Cash A/c             24600

To serive                                        26000    By Bal C/d                 7100

                                                    31700                                    31700

                                                      Account payable

To Cash    4500       By Bal.b/d            3700

To Bal. C/d    3200    By Supplies    4000

                                                   7700 7700    

a) Calculation profit for the jan 2021 (in $)

                                                Income Statement

Supplies of service                    :             26000

Less: Rent for jan 2021        675

Salaries 12000             (12675)

Profit for jan 2021                                   13325

               

b) Calculation of Current Assets and current liabilites for jan 2021

Current Assets :

Cash                          :        29100

Receivable      7100

Supplies 7600

Advance rent 6825

Total current Assets 50625         

Calculation of current Liabilities

Account payable                 3200

Advance from customer        4200

Total current liabilities          7400

Current assets and current liabilities ratio = 50625/7400 = 6.84

c) Based on profit and current assets and liabilities ratio dynamites fireworks financial condition is Good

                                       Journal Entry in the books of Gamecock Advertising agency on Dec 31 2021

1. 31 Dec 2021, Profit and Loss A/c Dr 3180

To Advance from customer A/c 3180

   (being adjusting entry for advance from customer 6month adjusted out of 10months)

2.a) Depreciation Account A/c Dr 6300

   To Equipment A/c 6300

                 (being depreciation charge on equipment )

b)       Profit and Loss A/c Dr 6300

To Depreciation A/c 6300           

   (being depreciation transfer to profit and loss a/c)

3. Profit and loss A/c Dr    1320

To Prepaid Insurance A/c 1320

(being prepaid insurance debited for 8months out of 24months )

4.    Profit and loss A/c Dr    390

To Interest on loan A/c 390

   (Being interest charges on loan till dec 2021, 13000X.09X4/12)

5.                             Profit and Loss A/c       1420

                                   To supplies A/c                  1420

                      (being supplies consumed during the year 2350-930 )