Question

How do I prepare adjusting entries for the following transcations?

Transactions to Record for the month of March

1-Mar	Issued 1,000 shares of F&F common stock for $30,000. The common stock has a $10 par value.
1-Mar	Paid $4,500 for rent for the Months of March and April
1-Mar	Hired two employees. Each employee will be paid $20 per hour. Employees will start on March 8th.
1-Mar	Borrowed $10,000 cash on a 3-year, 6% Note Payable, Interest is paid quarterly with the first payment due on June 1. Assume all months have 30 days.   See Account Titles
1-Mar	Purchased with cash four identical computers for $1,500 each. 4 desks with chairs for $800 each, 4 filing cabinets for $300 each and a $700 printer.
3-Mar	Purchased $2,500 of supplies on account.
5-Mar	Paid $250 for phone and internet service for the month of March.
6-Mar	Obtained Insurance coverage for $3,600 for a six-month period from March 1st to August 31st. Paid the premium in Cash.
10-Mar	Placed ads in the local papers. Each ad costs $80 per week and will run for the 3 weeks left in March and 4 weeks into April. (Total of 7 weeks.) The ads were placed on account.
15-Mar	Billed customers $4,500. $2,000 was for accounting services and the remainder for tax work.
16-Mar	Paid employees $1,200 for their services for the first week.
17-Mar	Several customers paid in advance for the firm to prepare their tax returns.   F&F received a check for $2,700.
20-Mar	Paid $800 toward the cost of supplies. See March 3rd transaction
22-Mar	Received Check for $2,400 from customers for the services billed on March 15.
23-Mar	Paid employees $1,750 for services from March 15 to March 22
25-Mar	Determined that a more powerful computer was need. One of the $1,500 computers was sold for $1,200 and a new computer costing $2,800 was purchased for cash. Ignore any depreciation on the computer sold.
28-Mar	F&F was informed that a customer who was billed $150 on March 15th had declared bankruptcy. Using the allowance method, write off this account.
29-Mar	Repurchased 200 shares of F&F common stock at $25 per share. These shares will be held in the treasury and will not receive cash dividends.
31-Mar	Paid employees $1,900 for services from March 23 to March 30
31-Mar	Billed Customers $7,900. $3,000 was for accounting services and the remainder for tax work.
31-Mar	Declared and Paid a cash dividend of $1.00 per share. (Treasury Stock does not receive this dividend.)

Then Post the transactions to T Accounts. You can prepare an unadjusted trial balance using the worksheet to check the equality of Debits and Credits. If you don’t want the worksheet, just prepare an unadjusted trial balance.

Using your knowledge, prepare the following adjusting entries. You can use the worksheet to make these entries or just record them in the general journal.

• The Allowance for Doubtful Account should be equal to 4% of Accounts Receivable.
• Adjust for insurance        
• Adjust for Advertising
• The Utility Bill arrived for the month of March. It was for $295 and will be paid in April.
• Supplies of $718 remain on hand
• Make sure Rent is correct.
• The 3-$1,500 computers and the printer should be depreciated over 3 years using the straight-line method. Assume there is no salvage value. You will be calculating depreciation for one month.
• The desks, chairs, and filing cabinets should be depreciated for the month assuming an 8 year life and a 1,000 salvage value. The straight line method will be used.
• 35% of the Unearned Tax Consulting Revenue was earned during the period
• Accounting Consulting Revenue of $1,400 was earned during the period, but was not billed or collected. (Ignore for bad debt adjustment)
• Employees worked for 15 hours on March 31. They will be paid in April.    
• Accrue 1 months interest on the note payable
• The Company is in the 20% tax bracket. This entry cannot be made until Net Income is determined.

Using the worksheet if you did one prepare an Income Statement both single and multi-step, a Statement of Retained Earnings and a Classified Balance Sheet. If you did not do the worksheet you must still prepare these statements, but you should not split Operating Expenses in General Expenses and Selling Expense you may keep them under the category of Operating Expenses.

Using the Statements you prepared, prepare a Statement of Cash Flows using the Indirect Method.

Prepare closing entries at the end of the month.

Answer 1

Adjusting entries 31-Mar Bad debts expense 544 Allowance for Doubtful Account 544 =3,600/6 31-Mar Insurance expense 600 Prepaid Insurance 600 31-Mar Advertising expense Accounts Payable =80*3 240 2$ 240 31-Mar Utility expense 295 Accounts Payable 295 31-Mar Supplies expense 1,782 =2,500-718 Supplies 1,782 =4,500/2 31-Mar Rent expense 2,250 Prepaid Rent 2,250 31-Mar Depreciation expense 144 Accumulated Depreciation-Computer Equipment 125 =(6,000-1,500)/3*1/12 19 =700/3*1/12 2$ Accumulated Depreciation-Office Equipment 31-Mar Depreciation expense |=(4,400-1,000)/8*1/12 35 Accumulated Depreciation-Furniture & Fixtures 35 31-Mar Unearned Tax Consulting Revenue =2,700*35% 945 2$ Tax Consulting Revenue 945 31-Mar Accounts Receivable 1,400 1,400 Accounting Consulting Revenue 31-Mar Salaries expense =20*15 300 Salaries Payable 300 31-Mar Interest expense =10,000*6%*1/12 50 Interest Payable 50 31-Mar Income tax expense =3.104*20% 621 Income Tax Payable 2$ 621 From Income Stmt Closing entries 31-Mar Accounting Consulting Revenue 6,400 $ 8,345 Tax Consulting Revenue $ 14,745 Income Summary $ 12,262 31-Mar Income Summary Salaries expense 5,150 Utility expense 545 Loss on sale of assets 300 Rent expense 2,250 Supplies expense 1,782 2$ Insurance expense 600 Bad debts expense 544 2$ Advertising expense Depreciation expense 240 2$ 180 Interest expense 2$ 50 Income tax expense 2$ 621 31-Mar Income Summary 2,483 Retained Earnings 2,483 31-Mar Retained Earnings 800 2$ Dividends 800

Adjusted TB F&F Unadjusted TB Adjustments Credit Debit Credit Debit Debit Credit Account Names Cash 12,600 12,600 Accounts Receivable 9,850 1,400 11,250 Allowance for Doubtful Account 150 544 394 Supplies 2,500 1,782 718 Prepaid Rent 4,500 2,250 2,250 Prepaid Insurance 3,600 600 3,000 7,300 Computer Equipment 7,300 Accumulated Depreciation-Computer Equipment 125 125 Furniture & Fixtures 4,400 4,400 Accumulated Depreciation-Furniture & Fixtu Office Equipment 35 35 700 700 Accumulated Depreciation-Office Equipment Accounts Payable 19 19 1,700 535 2,235 Unearned Tax Consulting Revenue Salaries Payable 2,700 945 1,755 300 300 Interest Payable 50 50 Income Tax Payable 621 621 Notes Payable 10,000 10,000 Common Stock 30,000 30,000 Retained Earnings Treasury Stock 5,000 5,000 Dividends 800 800 Accounting Consulting Revenue 5,000 1,400 6,400 Tax Consulting Revenue 7,400 945 8,345 Salaries expense 4,850 300 5,150 Utility expense 250 295 545 Loss on sale of assets 300 300 Rent expense 2,250 2,250 Supplies expense 1,782 1,782 Insurance expense 600 600 Bad debts expense 544 544 Advertising expense 240 240 Depreciation expense 180 180 Interest expense 50 50 Income tax expense 621 621 Totals 56,800 56,800 9,207 9,207 60,280 60,280

F&F Income Statement For the Month Ended March 31 Revenues Accounting Consulting Revenue Tax Consulting Revenue 6,400 8,345 Total Revenues 14,745 Expenses Salaries expense 5,150 Utility expense 545 Loss on sale of assets 300 2,250 Rent expense Supplies expense 1,782 600 Insurance expense Bad debts expense 544 Advertising expense 240 Depreciation expense 180 Interest expense 50 Total Expenses 11,641 Net Income before taxes 3,104 621 =3,104*20% Income tax expense Net Income 2,483 Statement of Retained Earnings For the Month Ended March 31 Beginning balance Net Income 2,483 Less Dividends (800) Ending Balance 1,683

F&F Income Statement - Multi-step For the Month Ended March 31 Revenues 6,400 Accounting Consulting Revenue 8,345 Tax Consulting Revenue Total Revenues 14,745 Operating expenses Salaries expense 5,150 Utility expense 545 Rent expense 2,250 Supplies expense 1,782 Insurance expense 600 Bad debts expense 544 Advertising expense 240 Depreciation expense Total Operating expenses 180 11,291 Operating Income Non-operating items 3,454 Loss on sale of assets 300 Interest expense 50 Total Non-operating items 350 Net Income before taxes 3,104 Income tax expense 621 Net Income 2,483

F&F Balance Sheet As of March 31 Assets Current Assets Cash 12,600 11,250 Accounts Receivable Allowance for Doubtful Account (394) 10,856 Supplies 718 Prepaid Rent 2,250 Prepaid Insurance 3,000 Total Current Assets 29,424 Non-Current Assets Computer Equipment 7,300 Accumulated Depreciation-Computer Equipment (125) 7,175 Furniture & Fixtures 4,400 Accumulated Depreciation-Furniture & Fixtures (35) 4,365 Office Equipment 700 Accumulated Depreciation-Office Equipment (19) 681 Total Non-Current Assets 12,220 Total Assets 41,644 Liabilities & Stockholders Equity Current Liabilities Accounts Payable 2,235 Unearned Tax Consulting Revenue Salaries Payable 1,755 300 Interest Payable 50 Income Tax Payable 621 Total Current Liabilities 4,961 Non-Current Liabilties Notes Payable 10,000 Total Non-Current Liabilties 10,000 Total Liabilties 14,961 Stockholders Equity Common Stock 30,000 Retained Earnings 1,683 Treasury Stock Total Stockholders Equity Total Liabilities & Stockholders Equity (5,000) 26,683 41,644

F&F Cashflow Statement - Indirect method Cash flows from Operating Activities 2,483 Net income Adjustments to reconcile net income to net cash from operating activities Loss on sale of assets 300 180 Depreciation expense Changes in operating assets and liabilities (11,250) Increase in current asset decreases cash Increase in Accounts Receivable 394 Increase in Allowance for Doubtful Account Increase in Supplies (718) (2,250) Decrease in Prepaid Rent Increase in Prepaid Insurance (3,000) Decrease in Accounts Payable Increase in current liabilities increases cash 2,235 Decrease in Unearned Tax Consulting Revenue 1,755 Increase in Salaries Payable Increase in Interest Payable 300 50 Increase in Income Tax Payable 621 Total adjustments Net Cash Provided/(Used) by Operating Activities (11,383) (8,900) Cash flows from Investing Activities Purchase of Computer Equipment (8,800) =6,000+2,800 Purchase of Furniture & Fixtures (4,400) Purchase of Office Equipment (700) Proceeds from sale of Computer Equipment 1,200 Net Cash Provided/(Used) by Investing Activities (12,700) Cash flows from Financing Activities Proceeds from issue of common stock 30,000 Proceeds from issue of notes 10,000 Purchase of treasury stock (5,000) Dividends paid Net Cash Provided/(Used) by Financing Activities Net Change in Cash Cash at Beginning of Period Cash at End of Period (800) 34,200 12,600 12,600