For the past several years, Jolene Upton has operated a part-time consulting business from her home. As of July 1, 2019, Jolene decided to move to rented quarters and to operate the business, which was to be known as Gourmet Consulting, on a full-time basis.
Gourmet Consulting entered into the following transactions during July:
July 1. The following assets were received from Jolene Upton: cash, $19,000; accounts receivable, $22,300; supplies, $3,800; and office equipment, $8,900.
There were no liabilities received.
1. Paid three months’ rent on a lease rental contract, $6,000.
2. Paid the premiums on property and casualty insurance policies, $4,500.
4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $8,000.
5. Purchased additional office equipment on account from Office Necessities Co., $5,100.
6. Received cash from clients on account, $12,750.
10. Paid cash for a newspaper advertisement, $500.
12. Paid Office Necessities Co. for part of the debt incurred on July 5, $3,000.
12. Provided services on account for the period July 1–12, $14,200.
14. Paid receptionist for two weeks’ salary, $1,500.
Record the following transactions on Page 2 of the journal:
17. Received cash from cash clients for fees earned during the period July 1–17, $10,400.
18. Paid cash for supplies, $1,000.
20. Provided services on account for the period July 13–20, $9,000.
24. Received cash from cash clients for fees earned for the period July 17–24, $8,500.
26. Received cash from clients on account, $12,000.
27. Paid receptionist for two weeks’ salary, $1,500.
29. Paid telephone bill for July, $325.
31. Paid electricity bill for July, $675.
31. Received cash from cash clients for fees earned for the period July 25–31, $7,100.
31. Provided services on account for the remainder of July, $5,500.
31. Jolene withdrew $20,000 for personal use.
Instructions
1. Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited.
(Do not insert the account numbers in the journal at this time.)
11 Cash31 Jolene Upton, Capital
12 Accounts Receivable 32 Jolene Upton, Drawing
14 Supplies41 Fees Earned
15 Prepaid Rent51 Salary Expense
16 Prepaid Insurance52 Rent Expense
18 Office Equipment53 Supplies Expense
19 Accumulated Depreciation—Office Equipment 54 Depreciation Expense
21 Accounts Payable55 Insurance Expense
22 Salaries Payable59 Miscellaneous Expense
23 Unearned Fees
2. Post the journal to a ledger of four-column accounts.
3. Prepare an unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6).
a. Insurance expired during July is $375.
b. Supplies on hand on July 31 are $2,850.
c. Depreciation of office equipment for July is $400.
d. Accrued receptionist salary on July 31 is $140.
e. Rent expired during July is $2,000.
f. Unearned fees on July 31 are $3,000.
5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet.
6. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal.
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a statement of owner’s equity, and a balance sheet.
9. Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.
10. Prepare a post-closing trial balance.
Answer:
1. and 2.
Page 1
Post.
Ref. Debit Credit
2019
July 1 Cash11 19,000
Accounts Receivable 12 22,300
Supplies14 3,800
Office Equipment 18 8,900
Jolene Upton, Capital 31 54,000
1 Prepaid Rent15 6,000
Cash11 6,000
2 Prepaid Insurance 16 4,500
Cash11 4,500
4 Cash11 8,000
Unearned Fees 23 8,000
5 Office Equipment 18 5,100
Accounts Payable 21 5,100
6 Cash11 12,750
Accounts Receivable 12 12,750
10 Miscellaneous Expense 59 500
Cash11 500
12 Accounts Payable 21 3,000
Cash11 3,000
12 Accounts Receivable 12 14,200
Fees Earned 41 14,200
14 Salary Expense51 1,500
Cash11 1,500
Page 2
Post.
Ref. Debit Credit
July 17 Cash11 10,400
Fees Earned 41 10,400
18 Supplies14 1,000
Cash11 1,000
20 Accounts Receivable 12 9,000
Fees Earned 41 9,000
24 Cash11 8,500
Fees Earned 41 8,500
26 Cash11 12,000
Accounts Receivable 12 12,000
27 Salary Expense51 1,500
Cash11 1,500
29 Miscellaneous Expense 59 325
Cash11 325
31 Miscellaneous Expense 59 675
Cash11 675
31 Cash11 7,100
Fees Earned 41 7,100
31 Accounts Receivable 12 5,500
Fees Earned 41 5,500
31 Jolene Upton, Drawing 32 20,000
Cash11 20,000
2., 6., and 9.
Account No. 11
Post.
Item Ref. Debit Credit Debit Credit
2019
July 1 1 19,000 19,000
1 1 6,000 13,000
2 1 4,500 8,500
4 1 8,000 16,500
6 1 12,750 29,250
10 1 500 28,750
12 1 3,000 25,750
14 1 1,500 24,250
17 2 10,400 34,650
18 2 1,000 33,650
24 2 8,500 42,150
26 2 12,000 54,150
27 2 1,500 52,650
29 2 325 52,325
31 2 675 51,650
31 2 7,100 58,750
31 2 20,000 38,750
Account No. 12
Post.
Item Ref. Debit Credit Debit Credit
2019
July 1 1 22,300 22,300
6 1 12,750 9,550
12 1 14,200 23,750
20 2 9,000 32,750
26 2 12,000 20,750
31 2 5,500 26,250
Account No. 14
Post.
Item Ref. Debit Credit Debit Credit
2019
July 1 1 3,800 3,800
18 2 1,000 4,800
31 Adjusting 3 1,950 2,850
Account No. 15
Post.
Item Ref. Debit Credit Debit Credit
2019
July 1 1 6,000 6,000
31 Adjusting 3 2,000 4,000
Account No. 16
Post.
Item Ref. Debit Credit Debit Credit
2019
July 2 1 4,500 4,500
31 Adjusting 3 375 4,125
Account No. 18
Post.
Item Ref. Debit Credit Debit Credit
2019
July 1 1 8,900 8,900
5 1 5,100 14,000
Account No. 19
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 400 400
Account No. 21
Post.
Item Ref. Debit Credit Debit Credit
2019
July 5 1 5,100 5,100
12 1 3,0002,100
Account No. 22
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 140 140
Post.
Item Ref. Debit Credit Debit Credit
July 4 1 8,000 8,000
31 Adjusting 3 5,0003,000
Post.
Item Ref. Debit Credit Debit Credit
July 1 1 54,000 54,000
31 Closing 4 50,335 104,335
31 Closing 4 20,00084,335
Post.
Item Ref. Debit Credit Debit Credit
July 31 2 20,000 20,000
31 Closing 4 20,000 — —
Post.
Item Ref. Debit Credit Debit Credit
July 12 1 14,200 14,200
17 2 10,400 24,600
20 2 9,000 33,600
24 2 8,500 42,100
31 2 7,100 49,200
31 2 5,500 54,700
31 Adjusting 3 5,000 59,700
31 Closing 4 59,700
Post.
Item Ref. Debit Credit Debit Credit
2019
July 14 1 1,500 1,500
27 2 1,500 3,000
31 Adjusting 3 140 3,140
31 Closing 4 3,140 — —
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 2,000 2,000
31 Closing 4 2,000 — —
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 1,950 1,950
31 Closing 4 1,950 — —
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 400 400
31 Closing 4 400 — —
Post.
Item Ref. Debit Credit Debit Credit
2019
July 31 Adjusting 3 375 375
31 Closing 4 375
Account No. 59
Post.
Item Ref. Debit Credit Debit Credit
2019
July 10 1 500 500
29 2 325 825
31 2 675 1,500
31 Closing 4 1,500 — —
3.
Account Debit Credit
No. Balances Balances
Cash11 38,750
Accounts Receivable12 26,250
Supplies14 4,800
Prepaid Rent15 6,000
Prepaid Insurance16 4,500
Office Equipment18 14,000
Accumulated Depreciation—Office Equipment 19 0
Accounts Payable21 2,100
Salaries Payable22 0
Unearned Fees23 8,000
Jolene Upton, Capital31 54,000
Jolene Upton, Drawing 32 20,000
Fees Earned41 54,700
Salary Expense51 3,000
Rent Expense52 0
Supplies Expense53 0
Depreciation Expense54 0
Insurance Expense55 0
Miscellaneous Expense 59 1,500
118,800 118,800
5. Optional (Appendix)
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 38,75038,75038,750
Accounts Receivable 26,25026,25026,250
Supplies 4,800(b) 1,950 2,8502,850
Prepaid Rent 6,000(e) 2,000 4,0004,000
Prepaid Insurance 4,500(a) 375 4,1254,125
Office Equipment 14,00014,00014,000
Accum. Depreciation(c) 400 400400
Accounts Payable2,1002,1002,100
Salaries Payable(d) 140 140140
Unearned Fees8,000 (f) 5,0003,0003,000
Jolene Upton, Capital 54,00054,00054,000
Jolene Upton, Drawing 20,00020,00020,000
Fees Earned54,700 (f) 5,000 59,700 59,700
Salary Expense 3,000 (d) 140 3,140 3,140
Rent Expense(e) 2,000 2,000 2,000
Supplies Expense(b) 1,950 1,950 1,950
Depreciation Expense(c) 400 400 400
Insurance Expense(a) 375 375 375
Miscellaneous Expense 1,5001,500 1,500
118,800 118,800 9,865 9,865 119,340 119,340 9,365 59,700 109,975 59,640
Net income50,33550,335
59,700 59,700 109,975 109,975
6.Page 3
Post.
Ref. Debit Credit
2019
July 31 Insurance Expense 55 375
Prepaid Insurance 16 375
Insurance expired.
31 Supplies Expense 53 1,950
Supplies14 1,950
Supplies used ($4,800 – $2,850).
31 Depreciation Expense 54 400
Accumulated Depreciation 19 400
Equipment depreciation.
31 Salary Expense51 140
Salaries Payable 22 140
Accrued salaries.
31 Rent Expense52 2,000
Prepaid Rent 15 2,000
Rent expired.
31 Unearned Fees23 5,000
Fees Earned 41 5,000
Unearned fees earned
($8,000 – $3,000).
7.
Account Debit Credit
No. Balances Balances
Cash11 38,750
Accounts Receivable12 26,250
Supplies14 2,850
Prepaid Rent15 4,000
Prepaid Insurance16 4,125
Office Equipment18 14,000
Accumulated Depreciation—Office Equipment 19 400
Accounts Payable21 2,100
Salaries Payable22 140
Unearned Fees23 3,000
Jolene Upton, Capital31 54,000
Jolene Upton, Drawing 32 20,000
Fees Earned41 59,700
Salary Expense51 3,140
Rent Expense52 2,000
Supplies Expense53 1,950
Depreciation Expense54 400
Insurance Expense55 375
Miscellaneous Expense 59 1,500
119,340 119,340
8.
Fees earned$59,700
Expenses:
Salary expense$3,140
Rent expense2,000
Supplies expense1,950
Depreciation expense400
Insurance Expense375
Miscellaneous expense1,500
Total expenses9,365
Net income$50,335
Jolene Upton, capital, July 1, 2019$ 0
Investments during month$ 54,000
Net income50,335
Withdrawals(20,000)
Increase in owner’s equity84,335
Jolene Upton, capital, July 31, 2019$84,335
GOURMET CONSULTING
Balance Sheet
July 31, 2019
Assets
Current assets:
Cash$38,750
Accounts receivable26,250
Supplies2,850
Prepaid rent4,000
Prepaid insurance4,125
Total current assets$75,975
Property, plant, and equipment:
Office equipment$14,000
Less accumulated depreciation400
Total property, plant, and equipment13,600
Total assets$89,575
Current liabilities:
Accounts payable$ 2,100
Salaries payable140
Unearned fees3,000
Total liabilities$ 5,240
Jolene Upton, capital84,335
Total liabilities and owner’s equity$89,575
9.Page 4
Post.
Ref. Debit Credit
2019
July 31 Fees Earned 41 59,700
Salary Expense 51 3,140
Rent Expense 52 2,000
Supplies Expense 53 1,950
Depreciation Expense 54 400
Insurance Expense 55 375
Miscellaneous Expense 59 1,500
Jolene Upton, Capital 31 50,335
31 Jolene Upton, Capital 31 20,000
Jolene Upton, Drawing 32 20,000
10.
Account Debit Credit
No. Balances Balances
Cash11 38,750
Accounts Receivable12 26,250
Supplies14 2,850
Prepaid Rent15 4,000
Prepaid Insurance16 4,125
Office Equipment18 14,000
Accumulated Depreciation—Office Equipment 19 400
Accounts Payable21 2,100
Salaries Payable22 140
Unearned Fees23 3,000
Jolene Upton, Capital31 84,335
89,975 89,975