Question

The following information relates to: Hair Consultancy Group.

                                                                   Hair Consultancy Group.

Unadjusted Trial Balance as at 30^th September 2019

	Debit $	Credit $
Bank	1,330
Accounts Receivable	18,190
Allowance for Doubtful Debts		700
Prepaid Rent	4,000
Journal Subscriptions Prepaid	2,500
Fixtures and Fittings	55,600
Accumulated Depreciation on Fixtures and Fittings		5,800
Goodwill	100,000
Accounts Payable		1,300
Consulting Service Revenue Received in Advance		7,000
M. Smith - Capital		138,000
M. Smith – Drawing	11,900
Consulting Service Revenue		62,970
Rent expense	9,000
Salaries expense	13,250
	215,770	215,770

Additional Information:

1.          Bad Debts of $190 are to be written off. The Allowance for Doubtful Debts is to                         be adjusted to 5% of Accounts Receivable.

2.          Prepaid Rent includes of $4,000 for rent for the months of September and October               2019.

3.          Fixtures and Fittings are depreciated on a straight -line basis: cost price was                    $55,600 estimated scrap value is $600 and the estimated economic life if 10 years.

4.          The account Consulting Services Revenue received in Advance, includes $3,000 which is now earned in September 2019.

5.          Journal Subscription Prepaid includes $500 for Journals to be delivered in                               October 2019.

6.          Salaries accrued but unrecorded on 30 September 2019, $3,780

Required:

1. General Journal entries to record the balance day adjustments on 30 September 2019.
2. Closing entries on 30 September 2019
3. Reversing entries on 1^st Oct 2019
4. A fully classified Balance Sheet as at 30th September 2019, showing Net Assets.

Answer 1

S.No. Date Particulars 1 30-Sep-19 Bad Debts a/c Accounts Receivable Debit Credit 190 190 200 30-Sep-19 Doubtful Debts adjustment Allowance for doubtful debts 200 Allowance Required->(18190-190)*5/100=900 Current allowance=700 2000 2 30-Sep-19 Rent expense Prepaid Rent 2000 458 3 30-Sep-19 Depreciation Accumulated Depreciation on Fixtures and Fittings (55600-600)/10=5500 for an year, 458 for a month 458 3000 4 30-Sep-19 Consulting Service Revenue Received in Advanc Consulting Service Revenue 3000 5 30-Sep-19 No entry required in september 3780 6 30-Sep-19 Salaries expense Salaries payable 3780

Closing Entries 1 30-Sep-19 Consulting Revenue Income Summary 65970 65970 28878 30-Sep Income Summary Rent Expense Bad debts expense Salaries expense Doubtful Debts adjustment Depreciation 11000 190 17030 200 458 Reversing Entries 1 1st Oct 3780 Salaries Payable Salaries Expense 3780

Hair Consulting Group As at 30th September 2019 Current Liabilities Non Current Assets Accounts Payable 1300 Fixture & fittings Consulting Service Revenue Received in Advance 4000 Less: Accumulated Depreciation o Salaries Payable 3780 Goodwill 55600 6258 100000 Shareholder's Equity M. Smith Capital Less: Drawings Add: Net income Current Assets 138000 Bank 11900 Accounts Receivable 37092 Less: Allowance for Doubtful Debt 1330 18000 900 17100 2000 2500 Prepaid Rent Journal Subscriptions prepaid 172272 172272

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