Allan indicates that, at year-end, customers owe him $1,000 accrued service revenue, which he expects to collect early next year. These revenues have not been recorded. During the year, he collected $4,100 service revenue in advance from customers, but the business has earned only $800 of that amount. During the year he has incurred $2,400 of advertising expense, but he has not yet paid for it. In addition, he has used up $2,100 of the supplies. Allan determines that depreciation on equipment was $7,000 for the year. At December 31, he owes his employee $1,200 accrued salary. The rent paid in advance on Jan 2 for $2,800 relates to the period January 2019 through to February 2020. The owner made no capital investments during the year. Allan expresses concern that drawing during the year might have exceeded the business’s net income. To get a loan to expand the business, Allan must show the bank that the business’s owner’s equity has grown from its original $40,000 balance. You and Allan agree that you will meet again in one week. Prepare the journal entries for the transactions that were not previously recorded
Allan indicates that, at year-end, customers owe him $1,000 accrued service revenue, which he expects to collect early next year. These revenues have not been recorded. During the year, he collected $4,100 service revenue in advance from customers, but the business has earned only $800 of that amount. During the year he has incurred $2,400 of advertising expense, but he has not yet paid for it. In addition, he has used up $2,100 of the supplies. Allan determines that
Allan expresses concern that drawing during the year might have exceeded the business’s net income. To get a loan to expand the business, Allan must show the bank that the business’s owner’s equity has grown from its original $40,000 balance. You and Allan agree that you will meet again in one week.
- Prepare the
journal entries for the transactions that were not previously recorded, prepare and update the T-accounts and determine the ending balance on all accounts used by the company.
- Prepare the adjusted
trial balance for the company.
- Prepare the 2019 company’s financial statements for presentation to the bank and to help address the first issue concerning Allan.
- Has the owner’s equity grown from its original $40,000 balance? Can Mr. Thorpe expect to get the loan? Give your reason(s).
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