Question

On August 1, 2020, Mark Diamond began a tour company in the Northwest Territories called Millennium Arctic Tours. The following occurred during the first month of operations:

Aug. 1 Purchased office furniture on account; \(\$ 4,700\).

1 Mark Diamond invested \(\$ 6,100\) cash into his new business.

2 Collected \(\$ 2,550\) in advance for a three-week guided caribou watching tour beginning later in August.

3 Paid \(\$ 4,650\) for six months' rent for office space effective August 1.

4. Received \(\$ 2,100\) for a four-day northern lights viewing tour just completed.

7 Paid \(\$ 1,050\) for hotel expenses regarding the August 4 tour.

15 Mark withdrew cash of \(\$ 600\) for personal use.

22 Met with a Japanese tour guide to discuss a \(\$ 100,000\) tour contract.

31 Paid wages of \(\$ 1,210\).

Required

1. Prepare general journal entries to record the August transactions.

2. Set up the following T-accounts: Cash (101); Prepaid Rent (131); Office Furniture (161); Accumulated Depreciation, Office Furniture (162); Accounts Payable (201); Unearned Revenue (233); Mark Diamond, Capital

(301); Mark Diamond, Withdrawals (302); Revenue (401); Depreciation Expense, Office Furniture (602); Wages Expense (623); Rent Expense (640); Telephone Expense (688); and Hotel Expenses (696).

3. Post the entries to the accounts; calculate the ending balance in each account.

4. Prepare an unadjusted trial balance at August 31, 2020 .

5. Use the following information to prepare and post adjusting entries on August 31:

a. The office furniture has an estimated life of three years and a \(\$ 272\) residual value. Use the straight-line method to depreciate the furniture.

b. Two-thirds of the August 2 advance has been earned.

c. One month of the Prepaid Rent has been used.

d. The August telephone bill was not received as of August 31 but amounted to \(\$ 230\).

6. Prepare an adjusted trial balance.

7. Prepare an income statement, a statement of changes in equity, and a balance sheet.

Analysis Component: When a company shows revenue on its income statement, does this mean that cash equal to revenues was received during the period in which the revenues were reported?

Answer 1

Step 1 Requirement 1 Journal Entries

Date	Accounting Titles and Explanations	Debit($)	Credit($)
Aug 1	Furniture	4,700
	Accounts Payable		4,700
Aug 1	Cash	6,100
	Mark Diamond Capital		6,100
AUg 2	Cash	2,550
	Unearned Service Revenue		2,550
Aug 3	Prepaid Rent	4,650
	Cash		4,650
Aug 4	Cash	2,100
	Service Revenue		2,100
Aug 7	Hotel Expense	1,050
	Cash		1,050
Aug 15	Mark diamond Drawings	600
	cash		600
Aug 22	No entry Required as no monetary transaction
Aug 31	Wages Expenses	1,210
	Cash		1,210

 

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Step 2 Requirement 2 &3 T accounts and posting In T accounts

                                                  Cash Account

Mark Diamond Capital	6,100	4,650	Prepaid Rent
Unearned Service Revenue	2,550	1,050	Hotel Expense
Service Revenue	2,100	600	Mark diamond Drawings
		1,210	Wages Expenses
Ending Balance	$2,940

 

                                             Prepaid Rent

Cash	4,650
Ending Balance	4,650

 

                                            Office Furniture(161)

Accounts payable	4,700
Ending Balance	4,700

 

                                    

                                               Accounts Payable

		4,700	Furniture
		4,700	Ending Balance

 

                                                   Unearned Revenue

		2,550	Furniture
		2,550	Ending Balance

 

                                                    Mark diamond's Capital

		6,100	Cash
		6,100	Ending Balance

 

                                              Mark diamond's Withdrawal

Cash	600
Ending Balance	600

 

                                                    Service Revenue

		2,100	Cash
		2,100	Ending Balance

 

                                        Wages Expense

Cash	1,210
Ending Balance	1,210

 

                                                 Hotel Expense

Cash	1,050
Ending Balance	1,050

 

Try to re post the question from requirement 4 onwards.