Question

4. The following transactions are being entered into the accounting system. Using the Chart of Accounts (attached), determine the changes to the balance sheet, income statement, job cost ledger, and equipment ledger as the result of entering each of the following transactions: (30 points] a. A $5,000 invoice for concrete charged to job cost code 102.01.32300M; b. A $24,400 invoice from a subcontractor for HVAC charged to job cost code 201.01.23100S. 15% retention is withheld from the invoice; c. A $3,000 bill for Office 1 rent d. A $3,000 of depreciation for Office 2 e. A 130,000 bill to a client for Job 225, and the client holds 10% retention f. The first loan payment of $2,435 for an equipment, which includes $1655.8 in principal and $779.2 in interest; g. A $6,000 of depreciation for a dump truck h. A piece of equipment was sold for $75,000 in cash. It was purchased for $125,000 and $70,000 of depreciation has been taken. There are no outstanding loans for this equipment.

Answer 1

A) Entry is : work in progress a/c dr $5000

to Accounts payable a/c $5000

Changes in : Balance sheet : Current assets ( workin progress) increases

current liabilities( Accounts payable) increases

Income statement : No change because amount directly allotted to work in progress

job cost code: Job cost increases to the extent of cost of material charged to work in progress

Equipment ledger: No change

B) Entry is: Work in progress a/c dr $24400

To Accounts payable a/c $24400

Accounts payable a/c dr $20740

to cash a/c $20740

( 24400-retention amount 15% of $24400 is $3660 , remaining amount o$20740 is paid)

Changes Balance sheet: Current assets (wip) Increases by $ 24400

Current assets (Cash) decreases by $20740

Current liabilities (Accounts payable ) increases

Income statement: No change

Job cost ledger;  job cost ledger increases to the extent of cost

Equipment ledger: No change

C) Office 1 rent a/c dr $3000

to Cash a/c $3000

Balance sheet: Current assets(cash) decreases by $3000

Income statement: Exoenses ( office rent) increases by $3000

Equipment ledger: No change

D) Depreciation A/C dr $3000

To office 2 a/c $3000

Balance sheet: Current assets (Office2) decreases to the extent of depreciation

Income statement: expenses( Depreciation) increses

Equipment ledger: To the extent of depreciation the equipment in office 2 decreases

E) Work in progress a/c dr $1,30,000

To accounts payable(client name) $1,30,000

Accounts payable a/c dr $1,17,000

To cash  a/c    $ 1,17,000

Balance sheet:

Current assets(wip) increases by $1,30,000

Current assets(cash) decreases by $1,17,000

Current liabilities (accounts payable) increases

Job cost Ledger:    Job cost ledger increases by the amount of cost

Income statement: No change

F) Interest expenses a/c dr $779.2

Loans payable a/c dr $1655.8

To cash a/c $2435

BALANCE SHEET: current assets( cash ) decreases

Current liabilities(Loans payable) decreases

Income statement: Expense( int exp) increases

G) Depreciation a/c dr $ 6000

to Dump truck a/c $6000

Balance sheet :

current assets (Dump truck) decreses

Income statement: Expenses(depreciation) increases

H)   the book value after set off depreciation is $125000-$70000= $55000

sale value $75000

profit = $20,000

cash dr    $ 75000

to profit and loss a/c $20,000

to equipment a/c $55000

Balance sheet: Current assets ( equipment) decreases by $55000 book value

current assets(cash) increases
Income statement: Income $20,000 to the extent of profit increases

Equipment : Equipment value decreases