1- Identify the three categories of the accounting equation, and list four accounts associated with each category 2- If total debits equal total credits on the trial balance, is the trial balance error-free? Explain your answer 3- What is the difference between cash basis accounting and accrual basis accounting? 4- When are adjusting entries completed, and what is their purpose? 5- What are the two basic categories of adjusting entries? Provide two examples of each 6- If an accrued expense is not recorded at end of the year, what is the impact on the financial statement? P2-30A Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance Ann Simpson started her practice as a design consultant on September 1, 2018. During the first month of operations, the business completed the following transactions 6 7 10 14 15 17 20 25 28 29 Sep. 1 Received $48,000 cash and issued common stock to Simpson. 4 Purchased office supplies, $1,200, and furniture, $1,300, on account Performed services for a law firm and received $1,900 cash. Paid $18,000 cash to acquire land to be used in operations. Performed services for a hotel and received its promise to pay the $1,200 within one week. Paid for the furniture purchased on September 4 on account. Paid assistant's semimonthly salary. $1,500. Received cash on account, $1,000. Prepared a design for a school on account, $650. Received $2,100 cash for design services to be performed in October. Received $2,900 cash for consulting with Plummer & Gordon. Paid $600 cash for a 12-month insurance policy starting on October 1. Paid assistant's semimonthly salary. $1,500. 30 Paid monthly rent expense, $600. 30 Received a bill for utilities, $350. The bill will be paid next month. 30 Paid cash dividends of $3,700. Requirements 1. Record each transaction in the journal using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance, Land; Furniture; Accounts Payable, Utilities Payable; Uneamed Revenue; Common Stock; Dividends; Service Revenue; Salaries Expense, Rent Expense; and Utilities Expensc. Explanations are not required. 2. Open a T-account for each of the accounts. 3. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal. 4. Prepare the trial balance of Ann Simpson, Designer, as of September 30, 2018. 30 P2-34A Preparing financial statements from the trial balance and calculating the debt ratio The trial balance as of July 31, 2018, for Sara Simon, Registered Dietician, is presented below: SARA SIMON REGISTERED DIETICIAN Trial Balance July 31, 2018 Account Title Cash Accounts Receivable Office Supplies Prepaid Insurance Equipment Accounts Payable Uneamed Revenue Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total Balance Debit Credit $ 38,000 9,000 2,300 2,400 16,000 $ 3,000 3,912 31,000 18,000 2,900 17,888 1,700 1,100 soo $ 7,000 $ 73,800 $ 73,800 Requirements 1. Prepare the income statement for the month ended July 31, 2018. 2. Prepare the statement of retained earnings for the month ended July 31, 2018 The beginning balance of retained earning was $0. 3. Prepare the balance sheet as of July 31, 2018. P3-33A Journalizing adjusting entries and subsequent journal entries Laughter Landscaping has collected the following data for the December 31 adjusting entries: a. Each Friday, Laughter pays employees for the current week's work. The amount of the weekly payroll is $8,000 for a five-day workweek. This year, December 31 falls on a Tuesday. Laughter will pay its employees on January 3. b. On January 1 of the current year, Laughter purchases an insurance policy that covers two years, $8,000. c. The beginning balance of Office Supplies was $4,300. During the year, Laughter purchased office supplies for $5,600, and at December 31 the office supplies on hand total $1,500. d. During December, Laughter designed a landscape plan and the client prepaid $6,500. Laughter recorded this amount as Unearned Revenue. The job will take several months to complete, and Laughter estimates that the company has earned 40% of the total revenue during the current year. e. At December 31, Laughter had earned $3,000 for landscape services completed for Turnkey Appliances. Turnkey has stated that it will pay Laughter on January 10. f. Depreciation for the current year includes Equipment, $3,000; and Trucks, $2,200. g. Laughter has incurred $250 of interest expense on a $550 interest payment due on January 15. Requirements 1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting Laughter Landscaping Assume Laughter records adjusting entries only at the end of the year. 2. Journalize the subsequent journal entries for adjusting entries a, d, and g.
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