Question

Ajayi Art, Inc. opened for business on April 1^st. Listed below are the transactions for Ajayi Art, Inc. for the month of April:

• April 1 Issued common stock in exchange for $250,000 cash.
• April 1 Purchased office equipment for $17,500 cash.
• April 1 Borrowed $20,000 from Novus Bank and signed a 10% note. Interest and principal to be paid in 12 months.
• April 5 Paid $4,000 rent in advance for the art gallery for the next two months.
• April 10 Purchased art supplies from Wacky Art Co. on account for $12,200.
• April 12 Received $5,300 from a customer who commissioned a piece of custom art to be completed by the end of the year.
• April 15 Paid miscellaneous office expenses totaling $285 in cash.
• April 17 Billed customers $3,400 for art classes provided in March.
• April 19 Paid $5,300 to Wacky Art Co.
• April 25 Received $2,200 from customers on account.
• April 30 Recorded $3,800 in salaries for the month of April. Paychecks will be disbursed to employees on May 2^nd.

Using an Excel spreadsheet, prepare the following:

1. Using the ACT350_CTTemplate_Mod2.xlsx file (in the module folder), enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Prepaid Rent, Office Equipment, Accumulated Depreciation, Accounts Payable, Common Stock, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Depreciation Expense, Retained Earnings, Unearned Revenue, Office Salaries Payable, Notes Payable, Interest Payable, and Interest Expense.
2. Prepare an unadjusted trial balance.
3. Record depreciation using a five-year life on the office equipment, the straight-line method, and no salvage value. Round to whole numbers. Also, record an adjustment for art supplies used in the amount of $2,510 and record interest expense for the note.
4. Prepare an adjusted trial balance.
5. Prepare an income statement, a statement of retained earnings and an unclassified balance sheet.
   ASSETS Cash Accounts Receivable Office Equipment Prepaid Rent Supplies Accumulated Depreciation
   

Answer 1

Answer:

1. Preparation of T-accounts

Il Cash Account Supplies Hizi capital 17,500 12,200 250,000 20,000 4000 | Bal 12,200 285 Office Equipment 17, Soo Salance 250,45 I Accounts Receivable 1 B 3,400 2200 Bal 1,200 Prepaid Rent 0 4000 Bal 17,500 Looo

Liabilities Stockholder's Equity I Notes Retained Groning Accounts Payable 5,300 5 13,200 9 | Ajayi - Capital | . 20.000 10 259000 Bal 299,000 Bal 00 Bal 20,000 6.900 Temporasy Accounts Interest Payable Salaries Payale Service Revenue Salaries Expense m 3800 3,400 3,800 Bal 3800 Bal 3400 Bal 3,800 Uneaned Revenue 5,300 Supplies Expense Miscellaneous Office Spence 285 Bal 5,300

2. Unadjusted Trial balance-

Ajayi Inc Undjusted Trial Balance As of April 30, 20xx
Accounts	Debit ($)	Credit ($)
Cash	$250,415
Accounts receivable	1,200
Supplies on hand	12,200
Prepaid rent	4,000
Office equipment	17,500
Accounts payable		6,900
Unearned revenue		5,300
Office salaries payable		3,800
Notes payable		20,000
Ajayi Capital		250,000
Service revenue		3,400
Miscellaneous office expenses	285
Office salaries expense	3,800
TOTAL	$ 289,400	$ 289,400

3.Adjusting entries -

1. To record depreciation - (17,500/5 * 1/12)

Depreciation Expense	$292
Accumulated depreciation		$292

2. To record supplies used-

Supplies expense	$2,510
Supplies on hand		$2,510

3. To record interest expense on notes payable -

(20,000 * 10% * 1/12) = 167

Interest expense	$167
Interest Payable		$167

T-ACCOUNTS after adjusting entries-

- Supplies © 12,200 I par Supplies Expense 2510 2510 EN ES Bal 12,200 A 2510 Depreciation Expense. Adj 292 pour auto

Interest Payable Accomulated Depreciation 167 292 Interest Expense Adj 167

4. Adjusted Trial balance -

Ajayi Inc Adjusted Trial Balance As of April 30, 20xx
Accounts	Debit ($)	Credit ($)
Cash	$250,415
Accounts receivable	1,200
Supplies on hand	9,690
Prepaid rent	4,000
Office equipment	17,500
Accumulated depreciation		292
Accounts payable		6,900
Unearned revenue		5,300
Office salaries payable		3,800
Interest Payable		167
Notes payable		20,000
Ajayi Capital		250,000
Service revenue		3,400
Supplies expense	2,510
Depreciation expense	292
Miscellaneous office expenses	285
Office salaries expense	3,800
Interest expense	167
TOTAL	$ 291,559	$ 291,559

5. Preparation of Income Statement:

	$	$
Sales revenue		3,400
Expenses:
Supplies expense	2,510
Depreciation expense	292
Miscellaneous office expenses	285
Office salaries expense	3,800
Interest expense	167	7,054
Net Income(Loss)		$ (3,654)
Net Loss		$(3,654)

Statement of Retained Earnings

Ajayi Art Inc Statement of Retained Earnings As of April 30
Retained Earnings, April 1	$ 0
Less: Net Loss	(3,654)
Retained Earnings, April 30	$ (3,654)

Balance sheet -

Ajayi Inc Balance sheet As of April 30, 20xx
ASSETS	($)	($)
Cash		$250,415
Accounts receivable		1,200
Supplies on hand		9,690
Prepaid rent		4,000
Office equipment	17,500
Accumulated depreciation	(292)	17,208
Total Assets		$282,513
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts payable		6,900
Unearned revenue		5,300
Office salaries payable		3,800
Interest Payable		167
Notes payable		20,000
Ajayi Capital	250,000
Less Retained earnings	(3,654)	246,346
Total Liabilities and Stockholders equity		$282,513