Prepare an adjusting balance sheet, income statement, and statement of retained
ID: 2590736 • Letter: P
Question
Prepare an adjusting balance sheet, income statement, and statement of retained earnings for the events listed below
GB 212 Transaction Analysis for MoviesDoorToDoor.com Part A Assume that MoviesDoorToDoor.com began on January 1, 2017. All transactions reflected in Parts A and B occur during the first quarter of operations Required: a) record the journal entries for each transaction b) record each transaction in T-accounts You do not need to do an unadjusted set of final statements for Part A. This will be done after the adjusting journal entries in Part B. 1. Courtney, Brad, John, and John's mother contributed a total of S60,000 cash in exchange for ownership interest in their new company, MoviesDoorTo Door.com (Movies). The company, which rents movie videos and DVDs, will be organized as a corporation. 2. On February 1, 2017, the company received $18,000 from Courtney's parents as a loan. The company must repay this money at the end of 5 years. Each year Movies must pay Courtney's parents interest on the loan at an annual rate of 8%. Courtney, Brad and John spent a significant amount of cash on various assets that were needed by the business. In total, $23,000 was spent to acquire computer equipment ($20,000) and office supplies ($3,000). 3. As the opening date came closer, more assets were purchased. These included inventories of tapes and DVDs (S12,000), additional computer equipment ($6,000) and office equipment such as cash registers, shelving and display cases ($4,000). All of these purchases were made on account. 4. 5. Another shipment of vendor. Movies paid $2,000 in cash for this purchase and put the rest on account. One laptop computer purchased in transaction #3 for $2,000 was found to be unsuitable for the needs of the business. The company sold that computer to an acquaintance of John's for $2,000. 6. 7. Movies paid $10,000 of its accounts payable.Explanation / Answer
Transaction Account Title Debit Credit 1 Cash 60000 Owner capital 60000 2 Cash 18000 5-Year 8% Loan 18000 3 Computer equipment 23000 Office supplies 3000 Owner capital 26000 4 Inventory 12000 Computer equipment 6000 Office equipment 4000 Accounts payable 22000 5 Inventory 5000 Cash 2000 Accounts payable 3000 6 Cash 2000 Computer equipment 2000 7 Accounts payable 10000 Cash 10000 8 Rent expense 18000 Insurance expense 4000 cash 22000 9 Cash 21000 Rent revenues 21000 10 Salary expense 2300 Cash 2300 11 Utility charges 6000 Cash 6000 12 Cash 400 Sales revenue 400 COGS 300 Inventory 300 13 Cash 720 Unearned rent revenues 720 Adjusting entries 14 Supplies expense 1800 Office supplies 1800 15 Prepaid rent 9000 Prepaid Insurance 3000 Rent expense 9000 Insurance expense 3000 16 Depreciation-Computer Equipment 2625 Accumulated depreciation-Computer equipment 2625 (23000-2000)/2*3/12 Depreciation-Office Equipment 250 Accumulated depreciation-Office equipment 250 (4000/4)*3/12 Depreciation-Inventory 2088 Accumulated depreciation-Inventory 2088 (12000+5000-300)/2*3/12 17 Unearned rent revenues 160 Rent revenues 160 18 Accounts Receivable 800 Rent revenues 800 19 Salary expense 200 Salary payable 200 20 Interest expense 360 Interest Payable 360 (18000*8%*3/12) 216003 216003 NET LEDGER BAL. LEDGER ACCOUNTS Debit Credit Debit Credit 2 5-Year 8% Loan 18000 18000 4 Accounts payable 22000 5 Accounts payable 3000 7 Accounts payable 10000 15000 18 Accounts Receivable 800 800 16 Accumulated depreciation-Computer equipment 2625 2625 16 Accumulated depreciation-Inventory 2088 2088 16 Accumulated depreciation-Office equipment 250 250 1 Cash 60000 5 Cash 2000 6 Cash 2000 7 Cash 10000 8 cash 22000 9 Cash 21000 10 Cash 2300 11 Cash 6000 12 Cash 400 13 Cash 720 2 Cash 18000 59820 13 COGS 300 300 1 Owner capital 60000 Owner capital 26000 86000 3 Computer equipment 23000 4 Computer equipment 6000 6 Computer equipment 2000 27000 16 Depreciation-Computer Equipment 2625 2625 16 Depreciation-Inventory 2088 2088 16 Depreciation-Office Equipment 250 250 8 Insurance expense 4000 15 Insurance expense 3000 1000 20 Interest expense 360 360 20 Interest Payable 360 360 4 Inventory 12000 5 Inventory 5000 13 Inventory 300 16700 4 Office equipment 4000 4000 3 Office supplies 3000 14 Office supplies 1800 1200 15 Prepaid Insurance 3000 3000 15 Prepaid rent 9000 9000 8 Rent expense 18000 15 Rent expense 9000 9000 9 Rent revenues 21000 17 Rent revenues 160 18 Rent revenues 800 21960 10 Salary expense 2300 19 Salary expense 200 2500 19 Salary payable 200 200 12 Sales revenue 400 400 14 Supplies expense 1800 1800 13 Unearned rent revenues 720 560 17 Unearned rent revenues 160 11 Utility charges 6000 6000 216003 216003 147443 147443 Trial Balance for the Quarter Cash 59820 Accounts Receivable 800 Inventory 16700 Office supplies 1200 Prepaid Insurance 3000 Prepaid rent 9000 Accounts payable 15000 Salary payable 200 Unearned rent revenues 560 Interest Payable 360 Computer equipment 27000 Office equipment 4000 Accumulated depreciation-Computer equipment 2625 Accumulated depreciation-Inventory 2088 Accumulated depreciation-Office equipment 250 5-Year 8% Loan 18000 Owner capital 86000 Sales revenue 400 COGS 300 Rent revenues 21960 Depreciation-Computer Equipment 2625 Depreciation-Inventory 2088 Depreciation-Office Equipment 250 Insurance expense 1000 Interest expense 360 Rent expense 9000 Salary expense 2500 Supplies expense 1800 Utility charges 6000 Total 147443 147443 Income statement Rent revenues 21960 Sales revenue 400 Less: COGS--tapes& DVDs 300 Rent revenues Depreciation-Computer Equipment 2625 Depreciation-Inventory 2088 Depreciation-Office Equipment 250 Insurance expense 1000 Interest expense 360 Rent expense 9000 Salary expense 2500 Supplies expense 1800 Utility charges 6000 25923 Net Loss -3563 Balance sheet as at the end of 1st qtr. 2017 Current Assets Cash 59820 Accounts Receivable 800 Office supplies 1200 Prepaid Insurance 3000 Prepaid rent 9000 Total current assets 73820 Fixed assets Computer equipment 27000 Less:Acc. depreciation-Computer equipment 2625 24375 Office equipment 4000 Less: Acc. depreciation-Office equipment 250 3750 Tapes & DVDs 16700 Less: Acc.depreciation-Inventory 2088 14612 Total assets 116557 Liabilities & Equity Current Liabilities Accounts payable 15000 Salary payable 200 Unearned rent revenues 560 Interest Payable 360 Total Current Liabilities 16120 5-Year 8% Loan 18000 Total liabilities 34120 Equity Owner capital 86000 Net loss for the quarter -3563 Total Equity 82437 Total Liabilities & Equity 116557 Statement of Retained Earnings for the quarter Net loss for the quarter -3563