Question

Part A

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, help with the following:

1. Using the iile (in the module folder), help with 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.

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2. Help with an unadjusted trial balance.

3. Please help with 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. Please help with an adjusted trial balance.

5. Help with an income statement, a statement of retained earnings and an unclassified balance sheet.

6. Pleas help with closing entries.

Part B

In a one-page memo, please help explain to the management team on April's financial performance.

Answer 1

1.

Cash
April 1	250,000	April 1	17,500
April 1	20,000	April 5	4,000
April 12	5,300	April 15	285
April 25	2,200	April 19	5,300
End. bal.	250,415
Accounts Receivable
April 17	3,400	April 25	2,200
End. bal	1,200
Supplies on Hand
April 10	12,200	Adj.	2,510
April 30	9,690
Prepaid Rent
April 5	4,000
April 30 Bal.	4,000
Office Equipment
April 1	17,500
April 30 Bal.	17,500
Accumulated Depreciation
		Adj.	291.67
		April 30 Bal.	291.67
Accounts Payable
April 19	5,300	April 10	12,200
		April 30 Bal.	6,900
Office Salaries Payable
		April 30	3,800
		April 30 Bal.	3,800
Interest Payable
		Adj.	166.67
		April 30 Bal.	166.67
Unearned Revenue
		April 12	5,300
		April 30 Bal.
Notes Payable
		April 1	20,000
		April 30, Bal.	20,000
Common Stock
		April 1	250,000
		April 30 Bal.	250,000
Retained Earnings
			0
Service Revenue
		April 17	3,400
			3,400
Office Salaries Expense
April 30	3,800
	3,800
Supplies Expense
Adj.	2,510
	2,510
Depreciation Expense
Adj.	291.67
	291.67
Interest Expense
Adj	166.67
	166.67
Miscellaneous Expense
April 15	285
	285

2.

A. Ayayi Art Inc. Trial Balance April 30
Account Titles	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
Office Salaries Payable		3,800
Unearned Revenue		5,300
Notes Payable		20,000
Common Stock		250,000
Retained Earnings		0
Service Revenue		3,400
Office Salaries Expense	3,800
Miscellaneous Expense	285
Totals	$ 289,400	$ 289,400

3. Adjusting entries:

Date	Account Titles	Debit	Credit
		$	$
April 30
a.	Depreciation Expense	291.67
	Accumulated Depreciation		291.67
b.	Office Supplies Expense	2,510
	Office Supplies		2,510
c.	Interest Expense	166.67
	Interest Payable		166.67

4.

A. Ayayi Art Inc. Adjusted Trial Balance April 30
Debit	Debit	Credit
$	$	$
Cash	250,415
Accounts Receivable	1,200
Supplies on Hand	9,690
Prepaid Rent	4,000
Office Equipment	17,500
Accumulated Depreciation		291.67
Accounts Payable		6,900
Unearned Revenue		5,300
Office Salaries Payable		3,800
Interest Payable		166.67
Notes Payable		20,000
Common Stock		250,000
Retained Earnings		0
Service Revenue		3,400
Supplies Expense	2,510
Depreciation Expense	291.67
Miscellaneous Office Expense	285
Office Salaries Expense	3,800
Interest Expense	166.67
Totals	$ 289,858.34	$ 289,858.34