Two complete accounting cycles
Cummings Enterprises experienced the following events for 2011, the first year of operation.
1. Acquired $13,000 cash from the issue of common stock.
2. Paid $4,000 cash in advance for rent. The payment was for the period April 1, 2011, to March 31, 2012.
3. Performed services for customers on account for $27,000.
4. Incurred operating expenses on account of $13,500.
5. Collected $25,150 cash from accounts receivable.
6. Paid $8,500 cash for salary expense.
7. Paid $11,500 cash as a partial payment on accounts payable.
Adjusting Entries
8. Made the adjusting entry for the expired rent. (See Event 2.)
9. Recorded $900 of accrued salaries at the end of 2011.
Eremite for 2012
1. Paid $900 cash for the salaries accrued at the end of the prior accounting period.
2. Performed services for cash of $8,500.
3. Purchased $1,200 of supplies on account.
4. Paid $4,500 cash in advance for rent. The payment was for one year beginning April 1, 2012.
5. Performed services for customers on account for $42,000.
6. Incurred operating expense on account of $19,250.
7. Collected $40,500 cash from accounts receivable.
8. Paid $20,000 cash as a partial payment on accounts payable.
9. Paid $14,000 cash for salary expense.
10. Paid a $6,000 cash dividend to stockholders.
Adjusting Entries
11. Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in 2011.)
12. Recorded supplies expense. A physical count showed that $300 of supplies were still on hand.
Required
a. Record the events and adjusting entries for 2011 in general journal form.
b. Post the 2011 events to T-accounts.
c. Prepare a trial balance for 2011.
d. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2011.
e. Record the entries to close the 2011 temporary accounts to Retained Earnings in the general journal and post to the T-accounts.
f. Prepare a post-closing trial balance for December 31, 2011.
g. Repeat requirements a through f for 2012.
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