May Day operated a proprietorship, Days Gone Bye. On January 01, 2018, the opening capital balance was $ 55,000. Days Gone Bye, in 2018, earned $ 70,000 revenue and incurred $ 110,000 expenses. May Day withdrew $ 5,000 from her personal bank account.
What was Days Gone Bye’s capital balance at December 31, 2018 after the closing journal entries were recorded and posted?
1. Prepare a single journal entry, with explanation, for each of the following transactions to correct the error made:
A. Debited office furniture and credited accounts payable regarding a $ 6,000 purchase of computer equipment on account.
B. Accrued a $ 12,000 bonus by debiting salary expense and crediting accounts payable.
C. Adjusted prepaid advertising by debiting prepaid advertising and crediting advertising expense for $ 3,000. This adjusting journal entry should have debited advertising expense and credited prepaid advertising for $ 3,000.
D. Debited accounts receivable and credited revenue $ 5,000 for work not yet performed.
E. Debited amortization expense and credited computer equipment $ 4,000 when recording the amortization expense.
2. Prepare two journal entries, with explanation, for each of the above transactions to correct the error made.
Barbara Imagine created Imagine That, a proprietorship, in 2016. Imagine That’s unadjusted T-accounts had the following December 31, 2018 balances:
Accumulated Amortization, Office Furniture
Unearned Service Revenue
Barbara Imagine, Capital
Barbara Imagine, Withdrawals
Accounts that required adjustments at December 31, 2018 were comprised of the following:
a. Amortization for the year was $ 16,500.
b. Supplies on hand at December 31, 2018 were $ 5,000.
c. Bonuses accrued at year end were $ 43,000 and were going to be paid in March, 2019.
d. Imagine That signed a contract on December 31, 2018. The contract stated that Imagine That was to provide interior design work for a shopping mall that was going to be open in June 2019. Imagine That was given a cheque for $ 250,000.
e. On December 31, 2018, Imagine That received a $ 6,000 invoice regarding an ad that it placed on the internet. The invoice will be paid in February 2019.
A. Record the above T-account information on a worksheet trial balance column. Then, record the adjusting journal entries onto the worksheet, and complete the worksheet. Identify each adjusting journal entry by the numeral corresponding to the data given.
B. In a journal, record the adjusting and closing journal entries. Provide explanations.
C. Prepare Imagine That’s December 31, 2018 income statement.
D. Prepare Imagine That’s December 31, 2018 statement of owner’s equity.
E. Prepare Imagine That’s December 31, 2018 balance sheet.
F. Prepare Imagine That’s December 31, 2018 post-closing trial balance.
John Tell created Tennis Rackets, a proprietorship, in 2015. Tennis Rackets produced a post-closing trial balance on December 31 2018, which included the following:
Post-Closing Trial Balance
December 31, 2018
Accumulated Amortization, Office Equipment
Accumulated Amortization, Building
Unearned Service Revenue
Note Payable, Long Term
John Tell, Capital
A. Prepare a December 31, 2018 classified balance sheet for Tennis Rackets.
B. Calculate Tennis Rackets’ current ratio and debt ratio at December 31, 2018.
Note that 1 year ago, the current ratio was 1.25, and the debt ratio was 0.96. Did Tennis Rackets’ ability to pay debts improve or deteriorate during 2018?