Question

Ms. Smythe, a very good consultant, decided to start her own business. After saving her money for several years, she has accumulated enough funds to go into business for herself. She has no accounting experience and needs your help to organize her March records for Consulting Works. (Please note that some accounts may not be used. Some accounts may be used more than once.) a. Fill in if a debit or credit is an increase (+) or a decrease (-) in the +/- row in the exam template chart. b. Record the transactions listed below for Consulting Works which occurred during March using the exam template chart. 1. Consulting Works sold common stock of $25,000 to the owner, Ms. Smythe, for cash. 2. Consulting Works purchased land for $5,000 and a building for $10,000. It made a down payment of $3,000 cash and a took out a loan (note) from the bank for the remaining $12,000. 3. Consulting Works paid cash for rent of $1,500 for March. 4. Consulting Works buys $500 of supplies on account. 5. Consulting Works collected $6,000 cash for consulting services. 6. Consulting Works paid an administrative assistant $2,000 cash for work performed in March. 7. Consulting Works paid cash for the supplies purchased on account in number 4. c. Calculate the balance in each account. d. Calculate Net Income. e. Show that Assets = Liabilities + Owner's Equity.

Answer 1

B) JOURNAL ENTRIES FOR RECORD OF TRANSACTION OF CONSULTING WORK

( b) onsulting work Cons Joomal Entries Particulars Amount (Dr) Amount con y Cash All Dr $25000 $25000 Yo Common Stock Al 2) Land Al 5,000 10,000 Boy Building the To cash All (Down payment) Lo Loan All 3000 12000 3) Rent Al 1500 1500 To cash No 500 4) Supplies All To Suppliers All 500 6000 6,000 5 Cash Ayo To fee earned b) Administrativ Assistent.az To Gash Ah 2 2000 2000 500 500 y Suppliers All To Cash All


C. CALCULATION OF BALANCES OF EACH ACCOUNT

(C) Calculation balances of of each Account. (a) Cash Alo To common stock to fee earned! $25000 By land ? Beilding / $ 3000 6000 1500 By Rent 500 By suppliess by Salary of 2000 Administsatine Assistent By balance c/d $ 24000 $ 31000 $ 31000 To balance old $ 24000 (b Common stock All To balance cld $25000 By Cash / 25000 $ 25000 $25000 $ 25000 by balance bid (C) Fee earned Alo $ 6000 By Cath All Ho balance old $6000 $ 6000 86ou $ 6000 By balance bed

(d) Land & Building All To Loan Alc to cash ac $19000 $12.000 Buy balance old $ 3000 $13000 $15.00 To balance b/d $ 15000 (@) Loans/ $12000 By Land & Building $2000 AL To balance rld $12000 $ 12000 $12000 Tay balance B/d (F) Rent ac $1500 By balance old To Cash Al $ISOD $1500 $ 1800 $/500 To balance bld & Supplies All Ho Carhoo By balameld 4500 to balance B/ 8500 $500 $500 $ 500

to cash ou (6 Administrative Assistent Ietent/o $ 2000 By balance Hd $ 2008 $2000 $ 2000 $ 2000 to balance bld Consultin Joail iting Boslance wosk Particulars Dakit Balance $ 24000 Credit Balance Cash All common stock ALL fee earned ALO $ 25000 $ 6000 Land Afc Bui Building a # Sova $10000 $1500 Reut All $ 500 Supplies Adminis foutine assistent Loan Al $2000 $12.000 fotal $43,000 $ 43,000


D) CALCULATION OF NET INCOME OF CONSULTING WORKS AND BALANCE SHEET AT THE END

(d) Calculation of Met Income of Comsulting work Particulars Amount $ 6000 Revanues les: Expenditure Reut Supplies Administrative Assisteut salovey $1500 $500 $2000 ($ 4000) $2000 Net INCOME (e) Statment showing prepration of balance sheet of consulting work year at end Amount Liabilities Commenstock Net Income Amount Assets $25000 Land $ 2000 $ 5000 $10,000 Building Owner's $27000 equity other liability Cash $24000 $ 12000 Loom $39006 $39000