Problem 2 (Workout)
Kelly Pitney has operated a part-time consulting business from her home.
As of April 1, 2010,
Kelly decided to move to rented quarters and to operate the business on a
full-time basis. The business will be known as Kelly Consulting. During
April, Kelly Consulting entered into the following transactions:
April 1. The following assets were received from Kelly Pitney as initial
investment: cash, $13,100; accounts receivable, $3,000; supplies, $1,400;
and office equipment, $12,500. There were no liabilities received.
1. Paid three months’ rent on a lease rental contract, $4,800.
2. Paid the premiums on property and casualty insurance policies, $1,800.
4. Received cash from clients (customers) as an advance payment for
services to be provided and recorded it as unearned fees (deferred
revenue), $5,000.
5. Purchased additional office equipment on account from Office Station
Co., $2,000.
6. Received cash from clients on account, $1,800.
10. Paid cash for a newspaper advertisement, $120.
12. Paid Office Station Co. for part of the debt incurred on April 5, $1,200.
12. Recorded services provided on account for the period April 1–12,
$4,200.
14. Paid part-time receptionist for two weeks’ salary, $750.
17. Recorded cash from cash clients for fees earned during the period
April 1–16, $6,250.
18. Paid cash for supplies purchased, $800.
20. Recorded services provided on account for the period April 13–20,
$2,100.
24. Recorded cash from cash clients (in cash transaction) for fees earned
for the period April 17–24, $3,850.
26. Received cash from clients on account, $5,600.
27. Paid part-time receptionist for two weeks’ salary, $750.
29. Paid telephone bill for April, $130.
30. Paid electricity bill for April, $200.
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30. Recorded cash from cash clients for fees earned for the period April
25–30, $3,050.
30. Recorded services provided on account for the remainder of April,
$1,500.
30. Kelly withdrew $6,000 for personal use.
Requirements
[1]. Journalize the above transactions and events
Kelly Pitney consulting Business
General journal
For the month ended April 30,2010
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date Description Post debit credit
ref
1 cash 11 13,100
Account receivable 12 3000
supplies 13 1400
Office equipment 14 12500
Owner equity 31 30,000
1 Prepaid rent 15 4800
cash 11 4800
2 Prepaid insurance 16 1800
cash 11 1800
4 cash 11 5000
Unearned fees 23 5000
5 Office equipment 18 2000
Account payable 21 2000
6 cash 11 1800
Account receivable 12 1800
10 Miscellaneous expense 59 120
cash 11 120
12 Account payable 21 1200
cash 11 1200
12 Account receivable 12 4200
Service revenue 41 4200
14 Salary expense 51 750
cash 11 750
17 cash 11 6250
Service revenue 41 6250
18 supplies 13 800
cash 11 800
20 Account receivable 12 2100
Service revenue 41 2100
24 cash 11 3850
Service revenue 41 3850
26 cash 11 5600
Account receivable 12 5600
27 Salary expense 51 750
cash 11 750
29 Utility expense 57 130
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cash 11 130
30 Utility expense 57 200
2)Post the journal entries (Hint answers cash and revenue balances are
22,100 and 20,950,respectively)
cash Account payable
Date Debit credit Date Debit Credit
1 13100 5 2000
1 4800 12 1200
2 1800
4 5000 2000-1200=800
6 1800
10 120 Account Receivable
12 1200
14 750
17 6250
18 800
24 3850
26 5600
27 750
29 130
30 200
30 3050
30 6000
Date Debit Credit
1 3000
6 1800
12 4200
20 2100
26 5600
30 1500
10800-7400=3400
38650-16550=22100
Supplies
Date Debit Credit
1 1400
18 800 0
2200-0=2200
Service revenue
date debit credit
12 4200
17 6250
20 2100
24 3850
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30 0 3050
30 0 1500
20950
Kelly pitney Capital
Date Debit Credit
1 30,000
30,000
Prepaid rent prepaid insurance
Date Debit Credit Date Debit credit
1 4800 0 2 1800
4800 1800
Office Equipment
Date Debit credit
1 12500
5 2000 0
14500
Utility expense
Date Debit Credit
29 130
30 200 0
330
Unearned fees
Date Debit Credit
4 0 5000
5000
Salaries expense
Date Debit Credit
14 750
27 750
1500
Advertising expense
Date Debit Credit
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10 120 0
120
Kelly pitney withdrawal
Date Debit Credit
30 6000
6000
3) Prepare trial balance (Hint answer total debit and credit is 56,750)
Kelly Pitney consulting business
Trial balance
April 30,2010
Account title Debit credit
cash 22100
Account receivable 3400
supplies 2200
Prepaid insurance 1800
Prepaid rent 4800
Office equipment 14500
Account payable 800
Unearned fees 5000
Kelly Pitney capital 30000
Kelly withdrawal 6000
Service revenue 20950
Salaries expense 1500
Advertising expense 120
Utility expense 330
56,750 56,750
4) prepare the worksheet using the following data which was assembled
on April 30,2016.
A)Insurance expired during April is $ 300
B) supplies on hand on April 30 are $1350
C)Depreciation of office equipment for April is $330
D)Accrued recreationalist salary on April 30 is $120
E)Rent expired during April is $1600
F)Unearned fees on April 30 are $2500 (Hint answers total debit and credit
of adjustments column is 5,700,net income is 18,300)
Kelly Pitney consulting Business
Work sheet
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For Month ended April 30,2010
Account title Trial balance Adjusted Adjusted Income Balance
column Trial balance statement sheet
Debit Debit Debit Debit Debit
credit credit credit credit credit
cash 2210 2210 2210
0 0 0
A/receivable 3400 3400 3400
supplies 2200 850 1350 1350
Prepaid 1800 300 1500 1500
insurance
Prepaid rent 4800 1600 3200 3200
Office equipment 1450 1450 1450
0 0 0
A/payable 800 800 800
Unearned fees 5000 2500 2500 2500
Kelly capital 3000 3000 3000
0 0 0
Withdrew 6000 6000 6000
Service revenue 2095 2500 2345 2345
0 0 0
Salary expense 1500 120 1620 1620
Miscellaneous 120 120 120
expense
Utility expense 330 330 330
56,75 56,75
0 0
Insurance 300 300 300
expense
Supplies expense 850 850 850
Rent expense 1600 1600 1600
Depr off. 330 330 330
Equipment
Accumulate depr. 330 330 330
Office equipment
Salary payable 120 120 120
5700 5700 5720 5720 5150 2345 5205 3375
0 0 0 0 0
Net in come 1830 1830
0 0
2345 2345 5205 5205
0 0 0 0
5) Prepare the financial statements(3 of them)
Kelly Pitney consulting Business
Income statement
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For Month ended April 30,2010
Service Revenue------------------------------------------------$23450
Salary expense--------------------------------------1620
Miscellaneous expense----------------------------120
Utility expense ---------------------------------------330
Insurance expense---------------------------------300
Supplies expense-----------------------------------850
Rent expense----------------------------------------1600
Depre off Eq expense------------------------------330
Total expense----------------------------------------------------5150
Net Income------------------------------------------------------$18300
Kelly Pitney consulting Business
Statement for owner equity
For month ended April 30, 2010
Kelly Pitney capital April 1, 2010 -------------------------------- 30,000
Net income for month------------------------------------ 18,300
Less withdrawals ------------------------------------------ (6000)
Increase in owner equity ------------------------------------------12,300
Kelly Pitney capital April 30, 2010-----------------------------$42,300
Kelly Pitney consulting business
Balance sheet
April 30, 2010
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Current Assets
Cash--------------------------------------------------22100
A /receivable----------------------------------------3400
Supplies----------------------------------------------1350
Prepaid insurance---------------------------------1500
Prepaid rent-----------------------------------------3200
Total current Asset------------------------------------------------$31,550
Plant Asset
Office equipment --------------------------------------14500
Less Accumulate dep off eqip-----------------------330 14170
Total Asset-----------------------------------------------------------$45,720
Liabilities
Account payable------------------------------------------800
Unearned fees--------------------------------------------2500
Salary payable--------------------------------------------120
Total liabilities-------------------------------------------------------$3,420
Owner equity
Kelly Pitney. Capital------------------------------------------------42300
Total Liabilities and owners equity--------------------------$45,720
6) Journalizing and posting Adjusting Entries.
The adjusting entries for Kelly Pitney consulting business as of April 30
Journalizing
A) Insurance expense----------------------------300
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Prepaid insurance-----------------------------------300
B) Supplies expense-----------------------------850
Supplies---------------------------------------850
C) Depre off Equ----------------------------------330
Accumulated off Equ-------------------------------330
D) salary expense--------------------------------120
salary payable---------------------------------------120
E) Rent expense----------------------------------1600
Prepaid rent------------------------------------------1600
F) Unearned fees----------------------------------2500
Service Revenue------------------------------------2500
Posting
Prepaid insurance
Debit Credit
300
300
Insurance expense
Debit Credit
300
300
Supplies expense
Debit Credit
850
850
Supplies
Debit Credit
2200 850
1350
850 850
Depreciation off equipment
Debit Credit
330
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330
Accumulate depreciation off equ
Debit Credit
330
330
Salary expense
Debit Credit
1500
120
1620
Salary payable
Debit Credit
120
120
Rent expense
Debit Credit
1600
1600
Prepaid rent
Debit Credit
4800 1600
3200 0
1600 1600
Service revenue
Debit Credit
2500
2500
Unearned fees
Debit Credit
2500
2500
7) Journalizing and posting closing Entries.
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Closing Accounts
1.To close Revenue
Service Revenue---------------------------------------23,450
Income summary--------------------------------------------23,450
2.To close expense
Income summary----------------------------------------------5150
Salary expense---------------------------------1620
Rent expense ----------------------------------1600
Supplies expense ------------------------------850
Insurance expense-----------------------------300
Miscellaneous expense-----------------------120
Utility expense----------------------------------330
Depre off equ-----------------------------------330
3.To close Drawing
Kelly Pitney capital--------------------------------------6000
Kelly Pitney Drawing----------------------------------6000
4.To close Income summary
Income summary------------------------------------------18,300
Kelly Pitney capital--------------------------------------18,300
Kelly Pitney consulting business
Post closing trial balance
For month ended April 30,2010
Account title Debit credit
Cash 22100
A/receivable 3400
Supplies 1350
Prepaid rent 3200
Prepaid insurance 1500
Off Equipment 14,500
Accumulated depr expense 330
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A/payable 800
Salary payable 120
Kelly capital 42,300
Unearned fees 2500
Total 46,050 46050
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