Option #1: Accounting Cycle

User Generated

jnyyleviren39

Business Finance

Description

Part A

Listed below are the transactions for Ajayi Art, Inc. for the month of July:

  • July 1 Ajayi Art, Inc. is started with an investment of $250,000 cash.
  • July 1 Ajayi purchases office equipment for $22,250 by signing a 10% note (interest and principal to be paid over the next 12 months).
  • July 6 Pays rent for the art gallery in advance for the next three months with a check for $3,000.
  • July 8 Purchases art supplies from Wacky Art Co. on credit for $10,300.
  • July 9 Receipt of $3,500 from a customer who has commissioned a piece of custom art to be completed by the end of the year.
  • July 11 Pays miscellaneous office expenses totaling $375 in cash.
  • July 13 Bills customers $4,300 for art classes provided in June.
  • July 15 Pays $3,500 to Wacky Art Co.
  • July 20 Receives $1,900 from customers on account.
  • July 30 Ajayi records $3,800 in salaries for the month of July. Paychecks will be disbursed to employees on August 2nd.
  1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Office Equipment, Accumulated Depreciation, Accounts Payable, Common Stock, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Depreciation Expense, and Income Summary.
  2. Prepare an unadjusted trial balance.
  3. Record depreciation using a 5-year life on the office equipment, the straight-line method, and no salvage value. Round to whole numbers. Also, record an adjustment for art supplies used in the amount of $1,510 and record interest expense for the note.
  4. Prepare an adjusted trial balance.
  5. Prepare an income statement, a statement of retained earnings, and an unclassified balance sheet.
  6. Prepare closing entries.

Part B

In a one-page memo conforming to the CSU-Global Guide to Writing and APA, provide an explanation to the management team on July's financial performance.

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Explanation & Answer

Attached.

Ajahi Art Inc
General Ledger
Date
20XX
July

Account Title and Explanations

Ref. No. Debit

1 Cash

Amount ($)
Credit

250.000

Owners Equity
(Being the initial capital injection into the business)
1 Office equipment(cost)
Accounts payable
(Being purchase of office equipment on credit)
Office equipment(interest)
Service revenue a/c
(Being interest charges from the date of acquisition to year end)
6 Rent expense
Bank
(Rent paid in advance by cheque)
8 Supplies on hand
Accounts Payables
(Purchase of art supplies from Wacky Art Co. on credit)
9 Cash

250.000

22.250
22.250

1.113
1.113

3.000
3.000

10.300
10.300

3.500

Accounts Receivable
(Cash received from a debtor)
11 Miscellaneous expenses
Cash
(Cash payment of Misc. office expenses)

3.500

375
375

13 Accounts Receivables
Service revenue
(Customer billing for art classes)

4.300

15 Accounts Payable
Cash
(Being cash payment to Wacky Art Co.)

3.500

20 Bank

1.900

4.300

3.500

Accounts Receivables
(Being receipt of money from customers)
30 Salaries

1.900

3.800

Bank
(Payment of salaries for the month of July)
Depreciation expense
Office Equipment
(Being depreciation charge for the year)

3.800

4.450
4.450

AJAYI ART ,INC
Closing Entries
For the month of July
Supplies on hand a/c
8-Jul Payables

$
10.300

31-Jul Bal b/d

10.300
8.790

Receivable
31-Ju...


Anonymous
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