Question

Question #1.

(70 marks)

RTS began business on December 1, 2019. Its December transactions are:

Dec.   1 Invested $40,000 in the business in exchange for common stock.

           2 Paid $1,500 cash for December rent.

           3 Purchased $1,880 of supplies for cash.

           4 Purchased $19,000 of office equipment; paying $12,700 cash with the balance due in 30 days.

          

         14 Paid $1,850 cash for assistant’s wages.

         20 Performed consulting services for $6,000 cash   

         30 Billed clients $14,400 for December consulting services

         31 Paid $2,800 cash for dividends

a.(10 marks)

Record these transactions in journal entry form

Assume December 31, 2019 fiscal year end.

b.

Prepare the unadjusted trial balance (10 marks)

Cash                                                                                             

Fees Receivable                                                                           

Supplies                                                                                      

Office Equipment                                                                        

Accounts Payable                                                                                                                                                    

Share Capital                                                                                                                                                             

Retained Earnings (Dividend)                                              

Consulting Revenue                                                                                                                                                

Wages Expense                                                                             

Rent Expense                                                                                                                                             ______

                                                                                                                                                                                       

c.

Journalize the following adjusting entries at December 31: (10 marks)

1. Supplies available at December 3 are $1,410.
2. Accrued wages payable at December 31 are $670
3. Depreciation for December is $240.
4. RTS has spent 60 hours on a tax fraud case during December. When completed in January, his work will be billed at $75 per hour. (Use Fees Receivable)

d.

Prepare the adjusted trial balance (10 marks)

e.

Prepare the underlying financials: the income statement for the month of December (10 marks) and the Balance sheet (20 marks) at December 31, 2019.

Answer 1

RTS Journal entries Date Account 1-Dec Cash Share Capital Credit Calculation Debit $ 40,000 $ 40,000 $ 2-Dec Rent Expense Cash 1,500 $ 1,500 $ 1,880 3-Dec Supplies Cash $ 1,880 $ 19,000 4-Dec Office Equipment Cash Accounts Payable $ 12,700 $ 6,300 $ 1,850 14-Dec Wages Expense Cash $ 1,850 $ 6,000 20-Dec Cash Consulting Revenue $ 6,000 $ 14,400 30-Dec Fees Receivable Consulting Revenue $ 14,400 $ 2,800 $ 2,800 31-Dec Retained Earnings (Dividend) Cash Adjusting entries 31-Dec Supplies Expense Supplies $ 470 1880-1410 $ 470 $ 670 31-Dec Wages Expense Wages Payable $ $ 670 $ 240 31-Dec Depreciation Expense Accumulated Depreciation - Office Equipment $ $ 240 $ 4,500 60 hours * $75 31-Dec Fees Receivable Consulting Revenue $ $ 4,500

Credit Credit Credit RTS T Accounts Date Debit Date Credit Cash 1-Dec $ 40,000 2-Dec $ 1,500 20-Dec $ 6,000 3-Dec $ 1,880 4-Dec $ 12,700 14-Dec $ 1,850 31-Dec $ 2,800 Date Debit Date Fees Receivable 30-Dec $ 14,400 31-Dec $ 4,500 Date Debit Date Supplies 3-Dec $ 1,880 Date Debit Date Office Equipment 4-Dec $ 19,000 31-Dec $ 470 Bal. Bal. Bal. Bal. $ 19,000 $ 25,270 Accum. Depr. - Office Equip 31-Dec $ $ 18,900 Accounts Payable 4-Dec $ 6,300 $ 1,410 Wages Payable 31-Dec $ 240 670 Bal. $ 240 Share Capital 1-Dec $ 40,000 Bal. $ 6,300 Retained Earnings (Dividend) 31-Dec $ 2,800 Bal. $ 670 Consulting Revenue 20-Dec $ 6,000 30-Dec $ 14,400 31-Dec $ 4,500 $ 24,900 Bal. Wages Expense 14-Dec $ 1,850 31-Dec $ 670 $ 40,000 Bal. $ 2,800 Rent Expense 2-Dec $ 1,500 Bal. Supplies Expense 31-Dec $ 470 Depreciation Expense 31-Dec $ 240 Bal. $ 2,520 Bal. $ 1,500 Bal. $ 470 Bal. $ 240

Unadjusted TB Debit Credit 25,270 14,400 1,880 19,000 6,300 RTS Account Names Cash Fees Receivable Supplies Office Equipment Accumulated Depreciation - Office Equipment Accounts Payable Wages Payable Share Capital Retained Earnings (Dividend) Consulting Revenue Wages Expense Rent Expense Supplies Expense Depreciation Expense Totals Adjusted TB Debit Credit 25,270 18,900 1,410 19,000 240 6,300 670 40,000 2,800 24,900 2,520 1,500 470 240 72,110 72,110 40,000 2,800 20,400 1,850 1,500 66,700 66,700

24,900 RTS Income Statement For the Month Ended December 31, 2019 Revenues Consulting Revenue Expenses Wages Expense Rent Expense Supplies Expense Depreciation Expense Total Expenses Net Income 2,520 1,500 470 240 4,730 20,170 Statement of Retained Earnings For the Month Ended December 31, 2019 Beginning Retained Earnings Net Income 20,170 20,170 (2,800) 17,370 Less Dividends Ending Retained Earnings

RTS Balance Sheet As of December 31, 2019 Assets Current Assets Cash Fees Receivable Supplies Total Current Assets Liabilities & Stockholders Equity Current Liabilities 25,270 Accounts Payable 18,900 Wages Payable 1,410 45,580 Total Current Liabilities 6,300 670 6,970 Property, Plant & Equipment Office Equipment Accumulated Depreciation - Office Equipment Total Property, Plant & Equipment Stockholders Equity 19,000 Share Capital (240) Retained Earnings 18,760 Total Stockholders Equity 40,000 17,370 57,370 Total Assets 64,340 Total Liabilities & Stockholders Equity 64,340