Question

a. Toby and Aly incorporate ASI, and each owner contributes $10,000 cash ($20,000 total) to the new corporation. The corporation issues stock to Toby and Aly. b. ASI Borrows $5,000 cash from a local bank using a one-year note. C. ASI pays $10,000 cash to buy a truck. d. ASI purchases $400 worth of grooming supplies (shampoos, etc.) on account. The company receives a bill and will pay the bill later. e. On January 1, ASI pays $600 in advance to Geico to cover insurance for its truck from January 1 through June 30. f. ASI groomed 30 dogs at a rate of $40 per dog ($1,200 total) during the month. The company collected cash from clients immediately after providing the service. g. ASI has a contract with two large corporate clients where ASI cares for all of the clients' employees' pets for the month while the employees are at work On January 15, ASI provided $6,000 worth of dog sitting and grooming services and gave each of the two clients a bill for the services. The clients did not pay ASI any cash yet. h. On January 28, a corporate client purchased a 12-month unlimited package and immediately paid ASi $24,000 cash. ASI will provide the client with grooming services bver the next 12 months, beginning on February 1, and ending on January 30 of next year. i. During January ASI paid $1,500 Cash to Employees for work performed in January j. One of the corporate clients from transaction (g) paid their bill by giving ASI $4,000 cash. K. ASI pays $250 to their supplier for the grooming supplies purchased at transaction (d). 1. ASI pays a $2,000 dividend to its shareholders. Required: 1. Record the journal entry for each of the transactions listed above.

Answer 1

Journal entries in the books of ASI, Inc

Date	Account title and explanation	Debit ($)	Credit ($)
a	cash a/c dr.	20000
	To common stock a/c		20000
	[Being corporation issued stock]
b	cash a/c dr	5000
	To bank note payable a/c		5000
	[Being ASI borrows loan from local bank using note payable ]
c	Truck a/c dr	10000
	To cash a/c		10000
	[Being ASI purchased truck by cash]
d	grooming supplies a/c dr	400
	To accounts payable a/c		400
	[Being purchased grooming supplies on credit]
e	prepaid insurance a/c dr	600
	To cash a/c		600
	[Being paid insurance in advance ]
f	cash a/c dr	1200
	To service revenue a/c		1200
	[Being groomed 30 dogs @40 each ]
g	accounts receivable a/c dr	6000
	To service revenue a/c		6000
	[Being not received any cash for service performed for two clients]
h	cash a/c dr	24000
	To unearned revenue a/c		24000
	[Being cash received in advance for the services which are performed next year ]
i	salaries a/c dr	1500
	To cash a/c		1500
	[Being cash paid to workers ]
j	cash a/c dr	4000
	To accounts receivable a/c		4000
	[Being cash collected from a client ]
k	accounts payable a/c dr	250
	To Cash a/c		250
	[Being paid for creditors ]
i	dividends a/c dr.	2000
	To cash a/c		2000
	[Being paid dividends to shareholders]
Adj	insurance expense a/c (600÷6) dr	100
	To prepaid insurance		100

preparation of income Statement of ASI Inc for the month ended jan 31

Income (a)	​​​​​​Amount ($)
Service revenue (1200+6000)	7200
Expenditure
Salaries	1500
Insurance paid (adjustment entry)	100
Total expenses (b)	1600
Net profit (a-b)	5600
Statement of Retained earnings
Net profit	5600
(-) dividends paid	(2000)
Retained earnings	3600

​​​​​​Statement of equity of ASI Inc for month ended jan 31

Common stock	Retained earnings	Equity
20000	3600	23600

Balance sheet of ASI Inc as of jan 31

ASSETS	Amount ($)	Amount ($)
Fixed assets
Truck		10000
Current assets
Cash	39850
Accounts receivable	2000
Prepaid insurance	500
Grooming supplies	400
Total current assets		42750
Total assets		52750
Equity and liabilities
Stock holders equity
Common stock	20000
Retained earnings	3600
Total stockholders equity		23600
Current liabilities
Accounts payable	150
Bank note payable	5000
Unearned revenue	24000
Total current liabilities		29150
​​​​​​Total equity and liabilities		52750

Working notes :

1.cash account

= [20000+5000+1200+24000+4000 - (10000+600+1500+250+2000) ]

= $39850

2. Accounts receivable

(6000-4000) = 2000

3. Prepaid insurance

(600-100) = 500

4. Accounts payable

(400-250) = 150