Question

John Smith established Cornerstone Consulting in March by contribution $20,000 cash to the business in exchange for common stock and a used vehicle valued at $8,000. Cornerstone had the following transactions in April.

April 2   Purchased $7,500 of office equipment; the company paid $1,000 cash, with the balance due in 30 days.    

April 3   Paid $3,600 cash for a two‑year (or 24‑month) premium toward insurance.

April 5 Purchased $1,500 of supplies on credit.

April 10 Received an advance of $2,500 cash from a client for an investigation to be completed during April and May.

April 12 Billed clients $8,500 for services performed.

April 18 Collected $5,200 cash from clients toward their accounts billed on April 12.

April 29 Paid $860 cash for vehicle fuel used in April.

April 30 Paid $100 cash for April newspaper advertising.

April 30 Paid $4,500 cash for the wages earned by the field agent.

April 30 Billed clients $6,000 for services performed.

April 30 Declared and paid cash dividends of $8,000.

1. Record the effects of each of above transactions for April using the financial statement effects template (note, some accounts have balances on March 31).
2. Continue in the FSET to record the effects of the following adjustments to the following accounts: insurance expense, supplies expense, depreciation expense—vehicle, depreciation expense—equipment, and service fees earned. Supplies still available on April 30 amount to $200. Depreciation for April was $250 on the vehicle and $50 on equipment. Two‑fifth of the fee received on April 10 for the investigation was earned by April 30.

3. Record the about transactions for April using journal entries.
4. Set up T‑accounts for the following accounts: cash, accounts receivable, supplies, prepaid insurance, vehicle, accumulated depreciation—vehicle, equipment, accumulated depreciation—equipment, accounts payable, unearned fees, common stock, retained earnings, dividends, consulting fees earned, fuel expense, advertising expense, wages expense, insurance expense, supplies expense, depreciation expense—vehicle, and depreciation expense—equipment. Enter the balances at the as of March 31.
5. Post the journal entries from part 3 to their T‑accounts (reference transactions in T‑accounts by date).
6. Prepare journal entries to adjust the following accounts: (a) insurance expense, (b) supplies expense, (c) depreciation expense—vehicle, (d) depreciation expense—equipment, and (e) service fees earned. Supplies still available on April 30 amount to $200. Depreciation for April was $250 on the vehicle and $50 on equipment. Two ‑fifth of the fee received on April 5 for the investigation was earned by April 30.
7. Post the adjusting journal entries from part 5 to their T‑accounts set up in part 4 and contain the postings from part 5.

Prepare Beneish Corporation’s income statement and statement of stockholders’ equity for year‑end

December 31 and its balance sheet as of December 31. There were no stock issuances or repurchases

during the year.

b. Prepare journal entries to close Beneish’s temporary accounts.

c. Set up T‑accounts for each account and post the closing entrie

Prepare Beneish Corporation’s income statement and statement of stockholders’ equity for year‑end

December 31 and its balance sheet as of December 31. There were no stock issuances or repurchases

during the year.

b. Prepare journal entries to close Beneish’s temporary accounts.

c. Set up T‑accounts for each account and post the closing entrie

8. Prepare Cornerstone’s income statement and statement of stockholders’ equity for month ended April 30 and its balance sheet as of April 30.
9. Prepare journal entries to close Cornerstone’s temporary accounts.
10. Post the closing entries to the T-accounts set up in part 4 and contain the postings from parts 5 and 7.

Answer 1

Cornerstone Consulting Debit in $ Credit in $ 7500 Journal Enteries Date Particulars Apr-02 Office Equipment Cash Accounts Payable (Equipment purhcased) 1000 6500 3600 Apr-03 Prepaid Insurance Cash ( 2 year insurance paid) 3600 1500 Apr-05 Supplies Accounts Payable (Supplies on credit) 1500 2500 Apr-10 Cash Unearned Fees (Advance from client) 2500 Apr-12 8500 Accounts Receivable Consulting Fees Earned (Services provided) 8500 5200 Apr-18 Cash Accounts Receivable (Cash from debtors) 5200 860 Apr-29 Fuel expense Cash (Expense paid) 860 100 Apr-30 Advertising Expense Cash (Expense paid) 100 4500 Apr-30 Wages Expense Cash (Expense paid) 4500 6000 Apr-30 Accounts Receivable Consulting Fees Earned (Services provided) 6000 Apr-30 Cash Dividend 8000 Cash 8000 (Dividends paid)

Adjusting Enteries Date Particulars Apr-30 Insurance Expense Prepaid Insurance (Insurance expired) Debit in $ Credit in $ 150 150 1300 Apr-30 Supplies Expense Supplies (Supplies used) 1300 250 Apr-30 Depreciation Expense - Vehicle Depreciation Expense - Equip. Accum.Depre - Vehicle Accum.Depre - Equip. (To record depreciation) 250 50 1000 Apr-30 Unearned Fees Consulting Fees Earned (Services provided) 1000 Debit in $ Credit in $ 7210 860 100 Closing Enteries Date Particulars Apr-30 Income Summary Fuel expense Advertising Expense Wages Expense Insurance Expense Supplies Expense Depreciation Expense - Vehicle Depreciation Expense - Equip. (Expense accounts closed) 4500 150 1300 250 50 15500 Apr-30 Consulting Fees Earned Income Summary (Revenue accounts closed) 15500 8290 Apr-30 Income Summary Retained Earnings (Profits transferred) 8290 8000 Apr-30 Retained Earnings Cash Dividend (Dividend account closed) 8000

Worksheet For the period ending Apr 30 9640 Unadjusted Adjustment Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 9640 9640 9300 9300 9300 1500 1300 200 200 3600 150 3450 3450 8000 8000 8000 250 250 250 7500 7500 7500 50 50 50 8000 8000 8000 2500 1000 1500 Particulars Cash Accounts Receivable Supplies Prepaid Insurance Vehicle Accum.Depre - Vehicle Office Equipment Accum.Depre - Equip. Accounts Payable Unearned Fees Common Stock Retained Earnings Cash Dividend Consulting Fees Earned Fuel expense Advertising Expense Wages Expense Insurance Expense Supplies Expense Depreciation Expense - Vehicle Depreciation Expense - Equip. Totals 1500 28000 28000 28000 290 8000 8000 14500 1000 15500 860 860 100 100 4500 150 4500 150 1300 1300 250 250 50 50 53000 53000 2750 2750 53300 53300 38090 38090 0 15500 860 100 Statement of Income For the period ending Apr 30 Consulting Fees Earned Less: Fuel expense Advertising Expense Wages Expense Insurance Expense Supplies Expense Depreciation Expense - Vehicle Depreciation Expense - Equip. Net Income 4500 150 1300 250 50 7210 8290 Statement of Retained Earnings For the period ending Apr 30 Net Income Cash Dividend 8290 -8000 290

Amounts in $ Amounts in $ Balance sheet As at Apr 30 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Insurance Amounts in $ Amounts in $ Liabilities Current Liabilities 9640 Accounts Payable 9300 Unearned Fees 200 3450 22590 8000 1500 9500 8000 -250 Non Current Assets Vehicle Accum.Depre - Vehicle Office Equipment Accum.Depre - Equip. Total Assets 7500 28000 7750 Shareholders Equity Common Stock 7450 Retained Earnings 37790 Total Liabilities & Equity -50 290 28290 37790