Mei-ling had a very busy December. At the end of the month, after journalizing a
ID: 2454501 • Letter: M
Question
Mei-ling had a very busy December. At the end of the month, after journalizing and posting the December transactions and adjusting entries, Mei-ling prepared the following adjusted trial balance.
Matcha Creations
Adjusted Trial Balance
December 31, 2017
Debit Credit
Cash NT$1,180
Accounts Receivable 875
Supplies 350
Prepaid Insurance 1,210
Equipment 1,200
Accumulated Depreciation-Equipment NT$ 40
Accounts Payable 75
Salaries and Wages Payable 56
Unearned Service Revenue 300
Notes Payable 2,000
Interest Payable 15
Share Capital—Ordinary 800
Dividends 500
Service Revenue 4,515
Salaries and Wages Expense 1,006
Utilities Expense 125
Advertising Expense 165
Supplies Expense 1,025
Depreciation Expense 40
Insurance Expense 110
Interest Expense 15
NT$7,801 NT$7,801
INSTRUCTIONS
Using the information in the adjusted trial balance, do the following.
(a) Prepare an income statement and a retained earnings statement for the 2 months ended December 31, 2017, and a classified statement of financial position at December 31, 2017. The note payable has a stated interest rate of 6%, and the principal and interest are due on November 16, 2019.
(b) Mei-ling has decided that her year-end will be December 31, 2017. Prepare closing entries as of December 31, 2017.
(c) Prepare a post-closing trial balance
Explanation / Answer
(All amounts in $) Income Statement for Matcha Creations as on 31 December 2017 Salaries & Wages 1006 Service Revenue 4515 Utilities 125 Advertising 165 Supplies 1025 Insurance 110 Depreciation 40 Interest 240 Net Income for the year 1804 4515 4515 Retained Earnings Statement as on 31 December 2017 Net Income for the year 1804 Less : Dividend paid 500 Earnings trfd to B/Sheet 1304 Classified Financial Position for Matcha Creations as on 31 December 2017 Liabilities $ $ Assets $ $ Current Liabilities Current Assets Accounts Payable 75 Cash 1180 Salaries & Wages Payable 56 Accounts Receivable 875 Unearned Service Revenue 300 431 Supplies 350 Prepaid Insurance 1210 3615 Long Term Liabilities Total Current Assets 3615 Notes Payable 2000 Interest payable on notes 15 Non-Current Assets Interest payable but not due 225 2240 Equipment 1200 Accumulated Depn. -40 1160 Total Liabilities 2671 Equity and Retained Earnings Share Capital Ordinary 800 Retained Earnings 1304 Total Liabilities and Equity 4775 Total Assets 4775 Interest accrued and not due is worked out as : Total Interest on Note payable of 2000 $ @ 6% for 2 years 240 Interest expense in Trial Balance -15 Interest payable but not due 225 The second effect for this affects the Income statement. The journal entry for the same is : Interest Expenses A/c DR 215 To Interest payable but not due A/c 215 Based on the entry above, the adjusted Trial Balance would appear as under (wherein the entire expenses and income would be adjusted to Retained Earnings) : Particulars Dr Cr $ $ Cash 1180 Accounts Receivable 875 Supplies 350 Prepaid Insurance 1210 Equipment 1200 Accumulated Depreciation - Equipment 40 Accounts Payable 75 Salaries & Wages Payable 56 Unearned Service Revenue 300 Notes Payable 2000 Interest payable on notes 15 Interest payable but not due 225 Share Capital Ordinary 800 Retained Earnings 1304 4815 4815