Chapter 4, Problem 4.7AP

(a)

To determine

T-Accounts:

T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:

• The title of accounts.
• The debit side (Dr) and,
• The credit side (Cr).

To Enter: The beginning balances of November in the ledger accounts.

Explanation of Solution

Enter the beginning balances of November in the ledger accounts as follows:

Cash
Nov.   1	$ 2,790
Bal.	$ 2,790

Table (1)

Supplies
Nov.   1	$  1,120
Bal.	$  1,120

Table (2)

Equipment
Nov.   1	$ 10,000
Bal.	$ 10,000

Table (3)

Accounts Payable
		Nov.   1	$ 2,300
		Bal.	$ 2,300

Table (4)

Accounts Receivable
Nov.   1	$   2,910
Bal.	$   2,910

Table (5)

Unearned Service Revenue
		Nov.   1	$  400
		Bal.	$  400

Table (6)

Common Stock
		Nov.   1	$10,000
		Bal.	$10,000

Table (7)

Retained Earnings
		Nov.   1	$ 3,000
		Bal.	$ 3,000

Table (8)

Accumulated Depreciation –Equipment
		Nov.   1	$   500
		Bal.	$   500

Table (9)

Salaries and Wages Payable
		Nov.   1	$   620
		Bal.	$   620

Table (10)

(b)

To determine

Journal:

Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

To Journalize: The transaction of Company S for the month of November.

Explanation of Solution

Journalize the transaction of Company S for the month of November.

Date	Account Title and Description	Debit ($)	Credit ($)
November 8	Salaries and Wages Payable	620
	Salaries and Wages Expense	600
	Cash		1,220
	(To record the payment made for salaries and wages of  employees)
November 10	Cash	1,800
	Accounts Receivable		1,800
	(To record the cash received in payment of account)
November 12	Cash	3,700
	Service Revenue		3,700
	(To record the cash received for the service performed)
November 15	Equipment	3,600
	Accounts Payable		3,600
	(To record the purchase of equipment on account)
November 17	Supplies	1,300
	Accounts Payable		1,300
	(To record the purchase of supplies on account)
November 20	Accounts Payable	2,500
	Cash		2,500
	(To record the payment of cash to creditors)
November 22	Rent Expenses	480
	Cash		480
	(To record the payment of rent for the month of November)
November 25	Salaries Expenses	1,000
	Cash		1,000
	(To record the salaries paid to the employees)
November 27	Accounts receivable	900
	Service Revenue		900
	(To record the services performed on account)
November 29	Cash	750
	Unearned Service revenue		750
	(To record the cash received for the service yet to provide)

Table (11)

(c)

To determine

To Post: The journal entries to the respective general ledger accounts.

Explanation of Solution

The posting of the journal entries to the general ledger accounts are as follows:

Cash
Nov. 1	$  2,790	Nov. 8	$  1,220
10	$  1,800	20	$  2,500
12	$  3,700	22	$     480
29	$     750	25	$  1,000
Total	$  9,040	Total	$  5,200
Bal.	$  3,840

Table (12)

Accounts receivable
Nov. 1	$  2,910	Nov. 10	$  1,800
27	$     900
	$  3,810		$  1,800
Bal.	$  2,010

Table (13)

Supplies
Nov. 1	$  1,120
17	$  1,300
Bal.	$  2,420

Table (14)

Equipment
Nov. 1	$ 10,000
15	$  3,600
Bal.	$ 13,600

Table (15)

Accumulated Depreciation – Equipment
		Nov. 1	$   500
		Bal.	$   500

Table (16)

Accounts Payable
Nov. 20	$  2,500	Nov. 1	$  2,300
		15	$  3,600
		17	$  1,300
Total	$2,500	Total	$  7,200
		Bal.	$  4,700

Table (17)

Unearned Service Revenue
		Nov.   1	$     400
		29	$     750
		Bal.	$  1,150

Table (18)

Salaries and Wages Payable
Nov.  8	$    620	Nov. 1	$    620
		Bal.	$       0

Table (19)

Common Stock
		Nov. 1	$10,000
		Bal.	$10,000

Table (20)

Retained Earnings
		Nov. 1	$  3,000
		Bal.	$  3,000

Table (21)

Service Revenue
		Nov.  22	$ 3,700
		27	$   900
		Bal.	$ 4,600

Table (22)

Salaries and Wages Expenses
Nov. 8	$     600
25	$  1,000
Bal.	$  1,600

Table (23)

Rent Expense
Nov.   22	$     480
Bal.	$     480

Table (24)

(d)

To determine

Trial balance:

A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit column with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances, and before the preparation of financial statements.

To prepare: The trial balance of Company S at November, 30.

Explanation of Solution

Prepare a trial balance of Company S for the month ended November, 30 as follows:

Company S Trial Balance November 30, 2017
Particulars	Debit $	Credit $
Cash	3,840
Accounts receivable	2,010
Supplies	2,420
Equipment	13,600
Accumulated depreciation- Equipment		500
Accounts payable		4,700
Salaries and wages payable		0
Unearned service revenue		1,150
Common stock		10,000
Service revenue		4,600
Retained earnings		3,000
Salaries and wages expense	1,600
Rent expenses	480
Total	23,950	23,950

Table (25)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $29,950.

(e)

To determine

Adjusting entries:

An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business

To Journalize: Theadjusting entries of Company S for November 30, posting the adjusting entries to the ledger accounts.

Explanation of Solution

The adjusting entries of Company S for November 30, 2017 are as follows:

(1)

Date	Accounts title and Description	Debit ($)	Credit ($)
November  30	Supplies expense                             (1)	1,320
	Supplies		1,320
	(To record the supplies expenses)

Working notes:

$\begin{array}{c}\text{Supplies expenses =}\left(\begin{array}{l}\text{Amount of supplies on beginning }\\ \text{of november - Supplies on hand}\end{array}\right)\\ =\$2,420-\$1,100\\ =\$1,320\end{array}$ (1)

Description:

• Supplies expense is an expense account. There is an increase in the expenses, and hence it is debited. (Increase in Supplies expense decreases stockholders’ equity account). Supply is an asset account. There is a decrease in asset, and hence, it is credited.

(2)

Date	Account Titles and Description	Debit ($)	Credit ($)
November  30	Salaries and wages expense	480
	Salaries and wages payable		480
	(To record the accrued salaries payable)

Description:

• Salaries and wages expense is an expense account. There is an increase in the salaries and wages expenses, and hence it is debited. (Increase in salaries and wages expense decreases stockholders’ equity account). Salaries and wages payable is a liability account. There is an increase in liability, and hence, it is credited.

(3)

Date	Account Titles and Description	Debit ($)	Credit ($)
November 30	Depreciation expense	250
	Accumulated depreciation –Equipment		250
	(To record the depreciation and the accumulated depreciation)

Description:

• Depreciation expense is an expense account. There is an increase in the expenses, and hence it is debited. Accumulated Depreciation is a contra-asset account. There is a decrease in assets, and hence, it is credited.

(4)

Date	Account Titles and Description	Debit ($)	Credit ($)
November 30	Unearned service revenue	500
	Service revenue		500
	(To record the service performed for the cash earned)

Description:

• Unearned service revenue is a liability account. There is a decrease in the liability, and hence it is debited. Service revenue is a component of stockholder’s equity account. There is an increase in service revenue, and hence, it is credited.
• Post the adjusting entries to the respective ledger accounts as follows:

Supplies
Nov.   30	$   2,420	30	$  1,320
Bal.	$   1,100

Table (26)

Supplies Expense
Nov.   30	$  1,320
Bal.	$  1,320

Table (27)

Salaries and Wages Expenses
Nov.  30	$  1,600
30	$     480
Bal.	$  2,080

Table (28)

Salaries and Wages Payable
		Nov.  30	$         0
		30	$     480
		Bal.	$     480

Table (29)

Accumulated Depreciation – Equipment
		Nov.  30	$     500
		30	$     250
		Bal.	$     750

Table (30)

Depreciation Expense
Nov.   30	$  250
Bal.	$  250

Table (31)

Service Revenue
		Nov.  30	$  4,600
		30	$     500
		Bal.	$  5,100

Table (32)

Unearned Service Revenue
	$     500	Nov.  30	$  1,150
		Bal.	$     650

Table (33)

(f)

To determine

Adjusted trial balance:

The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.

To prepare: An adjusted trial balance of Company S at November 30.

Explanation of Solution

Prepare an adjusted trial balance of Company S for the month ended November 30 as follows:

Company S Adjusted Trial Balance November 30, 2017
Particulars	Debit $	Credit $
Cash	3,840
Accounts receivable	2,010
Supplies	1,100
Equipment	13,600
Accumulated depreciation- Equipment		750
Accounts payable		4,700
Salaries and wages payable		480
Unearned service revenue		650
Common stock		10,000
Service revenue		5,100
Retained earnings		3,000
Depreciation expenses	250
Salaries and wages expense	2,080
Supplies expenses	1,320
Rent expenses	480
Total	24,680	24,680

Table (34)

Conclusion

The debit column and credit column of the adjusted trial balance are agreed, both having balance of $24,680.

(g)

To determine

Income statement:

An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.

$\boxed{\text{Net}\text{income = Total revenues – Total expenses}}$

Statement of retained earnings:

This is an equity statement which shows the changes in the stockholders’ equity over a period of time.

Classified balance sheet:

This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

To Prepare: The income statement for the month of November, the retained earnings statement for the month of November, a classified balance sheet of Company S for the month ended November 30, 2017.

Explanation of Solution

The income statement of Company S for the month of November, 30 2017 is computed in the table below:

S Company
Income Statement
As on November 30, 2017
Particulars	$	$
Revenue:
Service Revenue		5,100
Less:  Expenses
Salaries Expenses	2,080
Supplies Expenses	1,320
Rent Expenses	480
Depreciation Expenses	250
Total Expenses		4,130
Net income		970

Table (35)

The retained earnings statement of Company S for the month of November, 2017 is computed in the table below:

S Company
Retained earnings statement
For the month ended November 30, 2017
Particulars		$
Retained earnings at November, 1		3,000
Add:  Net income		970
Retained earnings at November, 30		3,970

Table (36)

The classified balance sheet of Company S as on November 30, 2017 is prepared in the table below:

S Company
Classified Balance sheet Statement
As  at November 30, 2017
Assets	$	$
Current assets:
Cash	3,840
Accounts receivable	2,010
Supplies	1,100
Total of current assets		6,950
Other assets:
Equipment	13,600
Less: Accumulated depreciation -Equipment	750
Total of other assets		12,850
Total assets		$19,800
Liabilities and Stockholders' equity	$	$
Liabilities:
Accounts payable	4,700
Unearned service revenue	650
Salaries and wages payable	480
Total liabilities		5,830
Stockholders' equity:
Common stock	10,000
Retained earnings	3,970
Total stockholders' equity		13,970
Total liabilities and stockholders' equity		19,800

Table (37)

Conclusion

The net income for the month of November, 2017 is $970.

The retained earnings for the month of November, 2017 are $3,970.

The classified balance sheet for the month ended November, 30 2017 are agreed, both the assets account and the liabilities account shows a balance of $19,800