Comprehensive Computer Program, Page 6 The Corporation performs adjusting entrie

Question

Comprehensive Computer Program, Page 6 The Corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December the following transactions occurred Dec. 1 Issued 20,000 shares of capital stock to Paula Petersen and other investors in exchange for a total of $40,000 cash. Dec. 1 Paid $9,600 to Mages Realty for 12 months rent paid in advance. (Use the Asset account Prepaid Rent for the entire amount). Dec. 2 Purchased plumbing repair equipment and tools from Host Corp. for $15,000 (use the ac count Plumbing Equipment). Paid $,.000 in cash with the balance due on a Note Payable (principal and interest due in 6 months). Dec. 4 Purchased office supplies on Account from Clousers for $1,000. Payment is due in 15 days. These supplies are expected to last for several months. Dec. 5 Purchased a 6 month business Insurance Policy for $1,200 from the Seyler Agency (use the Asset account Unexpired Insurance for the entire amount) Dec. 10 Received $4,000 cash from the Wink Apartment Complex in Exeter Township as advance payment for services to be provided. (Use the Liability account: Unearned Plumbing Fees.) Dec. 16 Paid employee salaries for the first two weeks of December, $2,000. Dec. 16 Earned s7,500 in fees for plumbing repairs completed in the first two weeks of December. $3,000 was received in cash and the remainder was billed to PPI's customers on Account (due in 10 days.) Dec. 19 Paid the amount due to Clousers on account from the Dec. 4th purchase. Dec. 26 Received amount due on account from the December 16th billing. Dec. 27 PPI was named, along with Mages Agency, as a co-defendant in a $15,000 lawsuit filed on behalf of Joseph Walker. Walker slipped on ice outside of the shop and broke his leg. The extent of the Corporation's legal and financial responsibility, if any, can not be determined at this time. (Note: this event does not need a journal entry at this time, but may require disclosure in the notes accompanying the financial statements, Dec. 30 Received a phone bill for the month of December from Sprint in the amount of $300. The amount is due on January 15, 2017. Dec. 30 Declared a cash dividend of $.05 (5 cents) per share, payable on January 15, 2017. Dec. 31 Earned $9,000 in fees for plumbing repairs provided for the second two weeks of December. $4,000 was received in cash and the remainder was billed to PPI's customers on Account (due in 12 days.)

Explanation / Answer

Adjusting entries:

Calculations and explanations:

Rent expense = 9600/12 = 800

Insurance expense = 1200/6 = 200

Interest expense = [6% of (15000-5000)]/12 = 50

Depreciation expense per year = 15000/5 = 3000. For the month of December = 3000/12 = 250

S. No Particulars Debit Credit a Rent expenses 800.00 Prepaid rent 800.00 b Insurance expense 200.00 Unexpired insurance 200.00 c Interest expense 50.00 Interest payable 50.00 d Depreciation expense 250.00 Accumulated depreciation - Plumbing equipment 250.00 e Office supplies expenses 400.00 Office supplies expenses 400.00 f Unearned plumbing fees 1,000.00 Plumbing fees earned 1,000.00 g Payroll expenses 2,200.00 Payroll payable 2,200.00 h Income tax expenses 2,500.00 Income ta payable 2,500.00

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