Question

Llutfiu Veterinary Services Inc. CHART OF ACCOUNTS

TRANSACTIONS

May:

1 Issued $855732 of common shares in the new company for cash.

1 Purchased land and a building worth $275,000 and $433,000 respectively, by making a down payment of $100,000 and securing a mortgage through TD Bank for the difference.

1 Purchased a three-year insurance policy for $69,300 effective today.

1. 1 The local police force paid $92,000 for the care of their detective and search and rescue

   dogs in advance.

2. 2 Purchased $3,075 of office supplies from Staples on account.

14 Paid employees $7,300 representing two weeks’ salary.
21 Summarized and recorded the billings to customers for the first three weeks of May for

veterinary service fees earned. Billings totalled $48,000.
28 Received $22,000 from clients in partial settlement of accounts billed on the 21st. 28 Paid another $7,300 for two weeks’ salary.
30 Repaired the damaged flooring for $8,550 on account.

30. 30 Paid Staples for the office supplies purchased on May 2.

31. 31 Paid a total of $1,115 for the month’s gas, water and electric bill.

31 Paid out dividends to shareholders of $1,040.
31 Made a mortgage payment of $3,800 to the bank consisting of $1,200 in interest and

$2,600 in principal.

Use the following information to journalize and post the adjustments for the month: a. One month's insurance coverage was consumed.
b. There was $2,300 of office supplies on hand at the end of the month.
c. The building has an estimated useful life of 25 years and a salvage value of $67,000. d. Employees earned $3,650 of unpaid and unrecorded salary.

e. A review of the contract with the police force that paid $92,000 in advance for veterinary services on May 1 revealed that one-eighth of the services had been completed in the month.
f. The company earned $15,000 of fees that had not yet been billed.

g. Income taxes for the month were estimated to be $975.

REQUIRED:

1. Prepare journal entries for each transaction.
2. Prepare T accounts and post the transactions.
3. Prepare an Adjusted Trial Balance as at May 31.
4. Prepare an Income Statement for the month.
5. Prepare a Statement of Changes in Equity.
6. Prepare a classified Statement of Financial Position. 7. Prepare closing journal entries.
8. Post the closing entries to T accounts.
9. Prepare a post-closing Trial Balance.

Answer 1

Journal Entries Account Title and Explaination Credit Date Post. Debit Ref. S Cash $ Мay.1 855,732.00 Common Stock 855,732.00 (To record issue of common stockfor cash) May.1 Land Building $ 275,000.00 $ 433,000.00 Cash $ 100,000.00 Mortgage Payable (To record Land and Building Purchased) $ 608,000.00 Prepaid Insurance May.1 69,300.00 Cash $ 69,300.00 |(To record THREE years insurance policy purchased) Cash $ Мay.1 92,000.00 Unearned Serrvice Fee 92,000.00 To record advance received)

Office Supplies $ May.2 3,075.00 Accounts Payable (To record office supplies purchased on account) 3,075.00 $ May.14 Salaries Expense 7,300.00 Cash $ 7,300.00 (To record Salaries paid) Accounts Receivable May.21 48,000.00 Service Fees 48,000.00 (To record service fees earned) May.28 Cash 22,000.00 Accounts Receivable $ 22,000.00 (To record collection ofreceivables) May.28 Salaries Expense 7,300.00 Cash $ 7,300.00 |(To record Salaries paid)

May.28 Salaries Expense $ 7,300.00 Cash 7,300.00 (To record Salaries paid) May.30 Accounts Receivable 8,550.00 Service Fees $ 8,550.00 (To record service provided on account) May.30 Accounts Payable 3,075.00 $ Cash 3,075.00 (To record payment of payables) May.31 Utilities Expense 1,115.00 Cash $ 1,115.00 (To record gas, water, electricity bills paid May.31 Dividends 1,040.00 Cash $ 1,040.00 (To record payment of dividends) May.31 Mortgage Payable Interest Expense 2,600.00 $ 1,200.00 Cash 3,800.00 (To record payment of mortgage installment) EA

Adjusting Entries Insurance Expense ($69300/3Yrsx1/12) $ 1,925.00 а Prepaid Insurance $ 1,925.00 (To record Expiredportion of prepaid insurance) Office Supplies Expense ($3075-$2300) Office Supplies (To record Consumption of office supplies) b $ 775.00 775.00 Depreciation Expense ($433000-$67000)/25 Yrs x 1/12 Accumulated Depreciation - Building 1,220.00 C 1,220.00 (To record Depreciation Expense) Salaries Expense d 3,650.00 Salaries Payable (To record accrued salaries expenses) $ 3,650.00

Salaries Expense d $ 3,650.00 Salaries Payable |(To record accrued salaries expenses) 3,650.00 Unearned Service Fees ($92000x1/8) 11,500.00 е Service Fees 11,500.00 (To record adjusting entry for service fees earned) Accounts Receivable f $ 15,000.00 Service Fees $ 15,000.00 (To record Service fees earned) Income Tax Expense 975.00 g Income Tax Payable $ 975.00 (Тo record inсоme tax expеnse)