Question

Question 3

(50 marks)

Bob’s Best Ads, a proprietorship created by Bob Best, did consulting work relating to commercials for television and ads for newspapers. Bob’s Best Ads prepared the following financial statement:

Bob’s Best Ads
Unadjusted Trial Balance
December 01, 2018
ACCOUNT	DEBIT	CREDIT
Cash	$   32,000
Accounts Receivable	30,000
Supplies	4,000
Prepaid Advertising	20,000
Computer Equipment	60,000
Accumulated Amortization, Computer Equipment		$              0
Furniture	100,000
Accumulated Amortization, Furniture		0
Accounts Payable		40,000
Salaries Payable		8,000
Unearned Revenue		15,000
Bob Best, Capital		130,000
Bob Best, Withdrawals	50,000
Consulting Revenue		286,000
Advertising Expense	70,000
Entertainment Expense	23,000
Salaries Expense	90,000
Total	$ 479,000	$ 479,000

In December 2018, the following transactions occurred:

1. December 01: Bob’s Best Ads paid $ 50,000 cash for a television ad, which promotes the great work that Bob’s Best Ads can do for its clients. It will air on television in February 01, 2019.
2. December 05: Bob Best withdrew $ 20,000 cash from his personal bank account, to purchase a watch for his dad’s birthday.
3. December 10: Bob’s Best Ads purchased $ 3,000 supplies on account.
4. December 12: A client gave Bob’s Best Ads a cheque for $ 25,000 for work to be done in March 2019.
5. December 15: Bob’s Best Ads provided $ 13,000 consulting services for a client; the client will pay Bob’s Best Ads in March 2019.
6. December 31: Bob Best did a physical count of office supplies, and he determined that $ 5,000 was on hand.
7. The computer equipment, purchased on January 02, 2018, was expected to last 5 years. The computer equipment had no residual value after 5 years. Bob’s Best Ads used the straight-line method of amortization.
8. The furniture, purchased on January 02, 2018, was expected to last 10 years; it had no expected value after 10 years. Bob’s Best Ads used the straight-line method of amortization.
1. Bob Best received a year-end bonus of $ 9,000, which will be paid in March 2019.

Required:

1. Journalize the above transactions affecting Bob’s Best Ads. Provide a written explanation for each journal entry recorded or not recorded.
2. Prepare a December 31, 2018 adjusted trial balance for Bob’s Best Ads. Record the expenses in alphabetical order.
3. Prepare a December 31, 2018 income statement for Bob’s Best Ads.
4. Prepare a December 31, 2018 statement of owner’s equity for Bob’s Best Ads. Assume that there have been no changes to the capital account since January 01, 2018.
5. Prepare a December 31, 2018 balance sheet for Bob’s Best Ads.

Answer 1

solution Event Date. Setit Event Debst 50.000 Dell Account Prepaid advertising catch (To record payment track for tuture advertising) 9.08 B. Dec 5 Bob best, withdrewt cash. 2 600D c. Dee 5 To record payment of money withdral Suppiles Account poyable 1 To record purchase of oupiles) 3000 Dec 12 2500 Dee is 13000 Dec 31 uneaned consulting Revenue (To record cash recersed in advance) Accounts Receriable Consulting Revenue (To record Reverse carras) Suppiles Expenses Suppiles (To record suppiles prooo14000-2000)) Amortization expenses suppiles. Accumated Amolantin Computer Equiment To record amortization pense (b100 bo monts Dec 31 1000

ti Dec 31 Gunitunter u Amortization Expenses & Accumlated amortiration -computer Equipment ( To record amortizatium expenses) 1,00,000/10 months Salary expenses 9000 I Dec 31 salaries payable 9000 4000 SUO 1000 - Part 2 Beginning for the period adjusted Accounts lachit credit debit credit/Debit eredit cash 30.000 usooo (13,000) Accounts payable 20(DOD 13.000 03.COO 1ooo Sooo Suppiles 70,000 Prepaid advertising 20.000 160.000 Computer equipment 60.000 1ooo Amuclated Amordination, compique funtture 100.000 1,00,000 833 Amudated Pomodaci Juniwe Accounts 3.000 40. payable 3000 9000 Salaries payable 31000 Unearned Revenue 85.000 10 DOO Bob est capital 1,30,000 DDOL 201600 Bob best withdrawala SODO Consulting Revenue 9.86.000 BUDDD 2.99,000 advertising Expensu Toooo 70,000 Entertainment Exp 2.000 salaries xp 90.000 Suppiles Emp 2000 0000 Amortization Expenes 1833 (833 Tolal. 4 H 19,600 47,9000 96.633 96,833 5,30,633 5, 30,823 8000 IS.CO SK_000 99.000 M

Part-3 income statement. Begging Debit credit I for the period Arbit credit adjusted debit credit 24.000 Acoounts Consulting Revenue less : Exp. Adevertising Exp Entertainment Exp salaries Exp Amortization Exp Suppiles 7aooo 33100 99,000 1833 2000 1,95,833 Net income. 1 1,03,167 1 Parti 4 statement of aloner's Equity Beginning Bob best capital Add'r net income Less: withdrawal. 1,30,000 1,03, 167 610,000) Ending capital (1.63, (67)

part is Balance Sheet Balance sheet Assets; Current asset cas cash Accounts recevable suppiles. Prepaid advertising 1S. DOO 5000 10,000 1,05,000 Total current assets Computer Equipment Accumulated-Amortaalim.com equip funiture. pecumlated Amortization, luwtme & 60.000 $ 1000 1,00,000 &33 1.58.167 2, 63, 167 43.000 12.000 40.000 Tolal assest, Laibilites and equoly current Liabilites: nccounts payable Salaries payable un canned Revenue Total taibilites glock holder's Bob's Best capital Tolal stockholderts equily Total Laibillites and equity 1.00 1,63,164 1163, 167