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Q1) Record adjusting entries and create financial Statements.

Accounting records for Beta Company contained the following balance as of December 31, 2008:

 

 Assets Liabilities and Shareholders' Equity
Cash $50,000 Accounts Payable $17,500
Accounts Receivable 26,500    
Prepaid Rent 3,600 Common Stock 48,600
Land 10,500 Retained Earnings 24,500
Totals $90,600 $90,600  

 

Following accounting events apply to Beta's 2009 fiscal year:

 

a. Jan. 1 Beta purchased a computer that cost $18,000 for cash. Depreciation is $6,000 per year.
b. Mar. 1 The Company borrowed $20,000 by issuing a two-year note at 12%.
c. May 1 The Company paid $6,000 cash in advance for a six-month lease starting on July 1 for office space.
d. June 1 The Company paid dividends of $2,000 to the owners.
e. July 1 The Company purchased land that cost $15,000 cash.
f. Aug 1 Cash payments on accounts payable amounted to $5,500.
g. Aug 1 Beta received $13,200 cash in advance for 12 months of service to be performed monthly for the next year, beginning on receipt of payment.
h. Sept. 1 Beta sold a parcel of land for $13,000, the amount it originally paid for the land.
i. Oct. 1 Beta purchased $1,300 of supplies on account.
j. Nov. 1 Beta purchased short-term investments for $10,000. The investments earn 5% per year.
k. Dec. 31 The Company earned service revenue on account during the year that amounted to $50,000.
l. Dec. 31 Cash collections from accounts receivable amounted to $46,000.
m. Dec. 31 The Company incurred other operating expenses on account during the year that amounted to $5,850.

 

The following additional information is available at December 31:

1. Salaries that had been earned by sales staff but not yet paid amounted to $2,300.

2. Supplies on hand at end of period totaled $200.

3. Beginning balance of $3,600 in Prepaid Rent was completely used up by end of the year.

 

Based on preceding transaction data, some extra adjustments require to be made before financial statements can be prepared.

 

Required

 

a. Open T-accounts and record account balance as of December 31, 2008.
b. Create journal entries to record transactions which occurred during 2009 and the essential adjusting entries at year-end. (Land is not depreciated.)
c. Post journal entries to T-accounts. (Hint: some new accounts must be opened.)
d. Create all four financial statements for the year ended December 31, 2009.
e. Create the closing entries.

i) Open t-accounts and record account balances at December 31, 2008.

ii) Create financial statements (income statement, statement of changes in retained earnings, and balance sheet).

iii) Create closing entries and post them to general ledger (the t-accounts).

 

iv) Create adjusted trial balance.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M922612

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