Problem

Anthony Asher's administrative assistant maintains a very simple computerized general ledger system. This system includes intuitive routines for recording receipts, payments, and sales on account. However, the system is not sufficiently robust to automate end-of-period adjustments. Below is the trial balance for the month ending January 31, 20X8. This trial balance has not been adjusted for the various items that are described below. Review the trial balance and narratives, and prepare the necessary adjusting entries.
Asher Corporation
Trial Balance
January 31, 20X8
Debits Credits
Cash $ 37,500 $ -
Accounts receivable 12,410 -
Prepaid insurance 2,400 -
Supplies 7,113 -
Equipment 35,000 -
Accumulated depreciation - 10,000
Accounts payable - 7,569
Unearned revenue - 8,500
Loan payable - 15,000
Capital stock - 24,000
Retained earnings, Jan. 1 - 15,457
Revenues - 43,995
Salary expense 12,098 -
Rent expense 13,000 -
Office expense 2,500 -
Dividends 2,500 -
$ 124,521 $ 124,521
Asher Corporation's equipment had an original life of 140 months, and the straight-line depreciation method is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at the end of its useful life. As of the end of the month, Asher Corporation has provided services to customers for which the earnings process is complete. Formal billings are normally sent out on the first day of each month for the prior month's work. January's unbilled work is $25,000. Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at $1,500. A review of supplies on hand at the end of the month revealed items costing $3,500. The $2,400 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30. The unearned revenue was collected in December of 20X7. 60% of that amount was actually earned in January, with the remainder to be earned in February. The loan accrues interest at 1% per month. No interest was paid in January.
&R&"Myriad Web Pro,Bold"&20B-03.08
B-03.08

Worksheet

GENERAL JOURNAL
Date Accounts Debit Credit
31-Jan
31-Jan
31-Jan
31-Jan
31-Jan
31-Jan
31-Jan
&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-03.08
B-03.08

Problem

Mo Lambert formed a corporation to provide concrete construction work. His jobs typically involve building parking lots, drives, and foundations. Mo provided the following information about transactions occurring during the first month of operation. Evaluate the transactions and prepare journal entries for this activity.
Jan. 2, 20X5 Mo Lambert invested $10,000 cash in the capital stock of the newly formed corporation.
Jan. 4, 20X5 Purchased equipment on account for $7,500.
Jan. 12, 20X5 Received $15,000 from customers for services rendered.
Jan. 15, 20X5 Received a bill for construction supplies used in the amount of $2,000.
Jan. 18, 20X5 Provided $3,200 of services on account.
Jan. 20, 20X5 Paid employees $2,300 for wages earned.
Jan. 22, 20X5 Collected 60% of the amount due for the work provided on January 18.
Jan. 23, 20X5 Paid 40% of the amount due on the equipment purchased on January 4.
Jan. 25, 20X5 Purchased (and immediately used) construction supplies for cash in the amount of $600.
Jan. 31, 20X5 The company paid Mo Lambert a $1,500 dividend.
&R&"Myriad Web Pro,Bold"&20B-02.03
B-02.03

Worksheet

GENERAL JOURNAL  Page 1
Date Accounts Debits Credits
1-2-X5
1-4-X5
1-12-X5
1-15-X5
1-18-X5
1-20-X5
1-22-X5
GENERAL JOURNAL  Page 2
Date Accounts Debits Credits
1-23-X5
1-25-X5
1-31-X5
&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-02.03
B-02.03

Problem

The CEO of newly formed Targus Company printed a copy of the company's general ledger prior to a recent plane flight. She settled into seat 7A next to where you were sitting. Once airborne, she removed the printed "GL" from her brief case and began examining the report. Unfortunately, she realized that her printer had run out of ink on the very last page. She is frustrated because she is not able to determine the company's exact profitability to date, and is on her way to a shareholder meeting where she is to issue a report on the company's progress. She happened to note that you were studying an accounting book, and asked if you might help her. Prepare a trial balance from the general ledger, determine the missing amount for salaries expense, and determine the company's profit for its first month.
CASH
Date Description Debit Credit Balance
02-Jan-X8 Balance forward - - -
03-Jan-X8 Journal Page 1 250,000 - 250,000
10-Jan-X8 Journal Page 1 - 75,000 175,000
14-Jan-X8 Journal Page 1 - 15,000 160,000
18-Jan-X8 Journal Page 2 40,000 - 200,000
21-Jan-X8 Journal Page 2 4,000 196,000
26-Jan-X8 Journal Page 2 3,000 193,000
31-Jan-X8 Journal Page 2 26,000 - 219,000
ACCOUNTS RECEIVABLE
Date Description Debit Credit Balance
02-Jan-X8 Balance forward - - -
06-Jan-X8 Journal Page 1 55,000 - 55,000
18-Jan-X8 Journal Page 2 - 40,000 15,000
LAND
Date Description Debit Credit Balance
02-Jan-X8 Balance forward - - -
10-Jan-X8 Journal Page 1 75,000 - 75,000
SALARIES PAYABLE
Date Description Debit Credit Balance
02-Jan-X8 Balance forward - - -
31-Jan-X8 Journal Page 2 - 18,000 18,000
CAPITAL STOCK
Date Description Debit Credit Balance
02-Jan-X8 Balance forward - - -
03-Jan-X8 Journal Page 1 - 250,000 250,000
REVENUES
Date Description Debit Credit Balance
02-Jan-X8 - - -
06-Jan-X8 Journal Page 1 - 55,000 55,000
31-Jan-X8 Journal Page 2 - 26,000 81,000
SUPPLIES EXPENSE
Date Description Debit Credit Balance
02-Jan-X8 - - -
26-Jan-X8 Journal Page 2 3,000 - 3,000
UTILITIES EXPENSE
Date Description Debit Credit Balance
02-Jan-X8 - - -
21-Jan-X8 Journal Page 2 4,000 - 4,000
SALARIES EXPENSE
Date Description Debit Credit Balance
02-Jan-X8 - - -
14-Jan-X8 Journal Page 1 15,000
31-Jan-X8 Journal Page 2
&R&"Myriad Web Pro,Bold"&20B-02.06
B-02.06

Worksheet

Debits Credits
Cash $ 219,000
Accounts receivable -
Land
Salaries payable
Capital stock
Revenues
Supplies expense
Utilities expense
Salaries expense
$ 219,000 $ -
&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-02.06
B-02.06
You can draw data from another worksheet -- in this case the amount appearing in cell C4 is "linked" to the amount on the "Problem" sheet in cell "G12". Click in C4 and note the reference system (=Problem!G12). You should experiment with this process for the other trial balance amounts.
This is an excellent exercise to learn about the Goal Seek function available in the "tools menu." Complete the entire trial balance (except for the missing amount in cell C12). Then, execute the goal seek function. Fill in the missing values in the goal seek pop-up box so that it instructs your computer to change C12 so that it sets C13 to equal the value of total credits ($349,000 in this problem).
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