Question

As of December 1, 2016, Kel El decided to move to rented quarters and to operate a consulting business, which was to be known as KE Consulting, on a full-time basis. KE Consulting entered into the following transactions during December.

Transactions:

December:

1. Kel El deposited $30,000 into KE Consulting as the sole owner.

1. KE Consulting purchased supplies, $1,500; and office equipment, $15,500.

1. Paid three months’ rent on a lease rental contract, $3,300.

2. Paid the yearly premium on property and casualty insurance policies, $7,200.

4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $5,000.

4. Purchased additional office equipment on account from Office Equip Co., $1,500. 10. Paid cash for a newspaper advertisement, $120.
14. Recorded services provided on account for the period December 1–14, $2,300. 15. Paid Office Equip Co. for part of the debt incurred on December 4, $1,100.

15. Paid part-time receptionist for two weeks’ salary, $600.
17. Recorded cash from cash clients for fees earned during the period December 1–16, $4,250. 18. Paid cash for supplies, $500.
22. Recorded services provided on account for the period December 15–22, $2,100.
25. Recorded cash from cash clients for fees earned for the period December 17–25, $1,850. 26. Received cash from clients on account, $2,600.
28. Paid part-time receptionist for two weeks’ salary, $600.
29. Paid water bill for December, $35.
30. Received the electricity bill for December, $224. (Will pay it later)
30. Recorded cash from cash clients for fees earned for the period December 26–30, $3,250. 30. Recorded services provided on account for the remainder of December, $1,200.
30. Kel El withdrew $4,000 for personal use.

Instructions

1. Journalize each transaction in a two-column journal, referring to the following
chart of accounts in selecting the accounts to be debited and credited. (Do not
insert the account numbers in the journal at this time. – This should be done at posting)

101 Cash
120 Accounts Receivable
124 Supplies
125 Prepaid Rent
126 Prepaid Insurance
150 Office Equipment
155 Accumulated Depreciation

201 Accounts Payable
210 Salaries Payable
220 Unearned Fees

301 Kel El, Capital
310 Kel El, Drawing
401 Fees Earned
501 Salary Expense
502 Rent Expense
503 Supplies Expense
504 Depreciation Expense

505 Insurance Expense

509 Advertising Expense

512 Utilities Expense

3. Prepare a trial balance as of December 31, 2016, listing all the accounts in the order given in the ledger.

4. Journalize and post the adjusting entries.

a. One month worth of Insurance expired.
b. Supplies on hand on December 31 are $1,350.
c. Depreciation of office equipment for December is $700. d. Accrued receptionist salary on December 31 is $90.
e. Rent expired during December is $1,100.
f. Unearned fees on December 31 are $2,600.

5. Prepare the adjusted trial balance.

6. Prepare an income statement, a statement of owner’s equity, and a balance sheet.

7. Journalize and post the closing entries. (Income Summary is account #320 in the chart of accounts.) Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.

8. Prepare a post-closing trial balance.

Answer 1