Question

Unadjusted Trial Balance For the year ended 31st Dec 2014 Credit Debit Cash 40,000 60,000 Accounts Receivab le Allowance for Doubtful Accounts Inventory Prepaid Insurance Equipment Accumulated Depreciation-Equipment Notes Payable Interest Payable Salaries & Wages Payable Owner's Capital Retained earnings Service Revenue Unearned service revenue 5,000 30,000 10,000 150,000 50,000 15,000 50,000 60,000 230,000 20,000 Cost of Goods Sold 100,000 30,000 Selling Expenses Interest Expense Admin Expenses 15,000 Interest revenues 10,000 Loss on sale of fixed assets 5,000 Total 440,000 440,000 $10,000 recorded as unearned service revenue was earned during the year Services performed for clients that were not recorded by December 31, $5,000 Prepaid Insurance expired during the year $3,000. (Admin Expense) Equipment is being depreciated at 20% per year. (C0GS expense) Office salaries and wages earned but unpaid December 31, 2014, $5,000. (Admin Expense) A physical count shows that $15,000 worth of inventory is left The note payable is a long term note with an interest rate of 20%. Interest is payable annually on Jan 1 st 1. 2. 3. 4. 5. 6. 7.

Answer 1

Transaction	General Journal	Debit	Credit
1	Unearned service revenue	10000
	Service revenue		10000
	(To record service revenue earned)
2	Accounts receivable	5000
	Service revenue		5000
	(To record service revenue accrued)
3	Admin. Expense	3000
	Prepaid insurance		3000
	(To record prepaid insurance expired)
4	Cost of goods sold ($150000 x 20%)	30000
	Accumulated depreciation-equipment		30000
	(To record depreciation on equipment)
5	Admin. Expense	5000
	Salaries & wages payable		5000
	(To record office salaries and wages earned but unpaid)
6	Cost of goods sold ($30000 - $15000)	15000
	Inventory		15000
	(To record adjustment to inventory)
7	Interest expense ($15000 x 20%)	3000
	Interest payable		3000
	(To record interest accrued on note payable)

Adjusted Trial Balance
31st December 2014
	Debit	Credit
Cash	40000
Accounts receivable	65000
Allowance for doubtful accounts		5000
Inventory	15000
Prepaid insurance	7000
Equipment	150000
Accumulated depreciation-equipment		80000
Notes payable		15000
Interest payable		3000
Salaries & wages payable		5000
Owner's capital		50000
Retained earnings		60000
Service revenue		245000
Unearned service revenue		10000
Cost of goods sold	145000
Selling expenses	30000
Interest expense	3000
Admin expenses	23000
Interest revenues		10000
Loss on sale of fixed assets	5000
Total	483000	483000

Income Statement
For the Year ended December 31, 2014
Revenue
Service revenue		245000
Cost of goods sold		145000
Gross profit		100000
Expenses:
Admin expense	23000
Selling expense	30000
Total expense		53000
Net operating income		47000
Other income and expense
Interest revenue	10000
Interest expense	-3000
Loss on sale of fixed assets	-5000
Total other income and expense		2000
Net income $		49000

Statement of Stockholders' Equity
	Owner's Capital	Retained Earnings	Total
Capital invested	50000		50000
Beginning retained earnings		60000	60000
Add Net income		49000	49000
Minus Dividends declared
Ending retained earnings		109000
Ending owner's capital	50000
Ending stockholders' equity			159000

Balance Sheet
December 31, 2014
Assets
Current assets
Cash		40000
Accounts receivable	65000
Allowance for doubtful accounts	-5000	60000
Inventory		15000
Prepaid insurance		7000
Total current assets		122000
Long-term assets
Equipment	150000
Accumulated depreciation-equipment	-80000
Total long-term assets		70000
Total assets		192000
Liabilities
Current liabilities
Interest payable		3000
Salaries & wages payable		5000
Unearned service revenue		10000
Total current liabilities		18000
Long-term liabilities
Notes payable		15000
Total liabilities		33000
Stockholders' Equity
Owner's capital		50000
Retained earnings		109000
Total stockholders' equity		159000
Total liabilities and stockholders' equity		192000