During its first month of operation, the Quick Tax Corporation, which specialize

Question

During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation, completed the following transactions. July 1 Began business by making a deposit in a company bank account of $40,000, in exchange for 4,000 shares of $10 par value common stock. July 3 Paid the current month's rent, $2,500 July 5 Paid the premium on a 1-year insurance policy, $3,600 July 7 Purchased supplies on account from Little Company, $700. July 10 Paid employee salaries, $2,800 July 14 Purchased equipment from Lake Company, $9,500. Paid $1,500 down and the balance was placed on account. Payments will be $500.00 per month for 20 months. The first payment is due 8/1. Note: Use accounts payable for the balance due. July 15 Received cash for preparing tax returns for the first half of July, $6,500 July 19 Made payment on account to Lake Company, $500. July 31 Received cash for preparing tax returns for the last half of July, $8,250 July 31 Declared and paid cash dividends of $450. Prepare the financial statements for the Quick Tax Corporation as of July 31 in the space below. You will only be preparing the income statement, statement of retained earnings, and the balance sheet. The statement of cash flows is a required financial statement, but is not required for this case study. Quick Tax Corporation Quick Tax Corporation Quick Tax Corporation Income Statement Statement of Retained Earnings Balance Sheet For the Month Ending July 31 For the Month Ending July 31 July 31 Revenues: Retained Earnings, July 1 Assets: Revenue Add: Net Income Cash Subtotal Supplies Expenses: Less: Dividends Prepaid Insurance Rent Expense Retained Earnings, July 31 Equipment Salaries Expense Less: Accum. Depr. Insurance Expense Total Assets Supplies Expense Depreciation Expense Liabilities: Income Tax Expense Accounts Payable    Total Expenses Income Tax Payable Total Liabilities Net Income Stockholders' Equity: Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and    Stockholders' Equity Prepare the closing entries at July 31 in the General Journal below. General Journal Date Description (Account Name) Debit Credit Requirement #9: Post the closing entries to the General Ledger T-accounts and compute ending balances. Just add to the adjusted balances already listed. Prepare a post-closing trial balance as of July 31 in the space below. Quick Tax Corporation Post-Closing Trial Balance July 31 0 0 During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation, completed the following transactions. July 1 Began business by making a deposit in a company bank account of $40,000, in exchange for 4,000 shares of $10 par value common stock. July 3 Paid the current month's rent, $2,500 July 5 Paid the premium on a 1-year insurance policy, $3,600 July 7 Purchased supplies on account from Little Company, $700. July 10 Paid employee salaries, $2,800 July 14 Purchased equipment from Lake Company, $9,500. Paid $1,500 down and the balance was placed on account. Payments will be $500.00 per month for 20 months. The first payment is due 8/1. Note: Use accounts payable for the balance due. July 15 Received cash for preparing tax returns for the first half of July, $6,500 July 19 Made payment on account to Lake Company, $500. July 31 Received cash for preparing tax returns for the last half of July, $8,250 July 31 Declared and paid cash dividends of $450. Prepare the financial statements for the Quick Tax Corporation as of July 31 in the space below. You will only be preparing the income statement, statement of retained earnings, and the balance sheet. The statement of cash flows is a required financial statement, but is not required for this case study. Quick Tax Corporation Quick Tax Corporation Quick Tax Corporation Income Statement Statement of Retained Earnings Balance Sheet For the Month Ending July 31 For the Month Ending July 31 July 31 Revenues: Retained Earnings, July 1 Assets: Revenue Add: Net Income Cash Subtotal Supplies Expenses: Less: Dividends Prepaid Insurance Rent Expense Retained Earnings, July 31 Equipment Salaries Expense Less: Accum. Depr. Insurance Expense Total Assets Supplies Expense Depreciation Expense Liabilities: Income Tax Expense Accounts Payable    Total Expenses Income Tax Payable Total Liabilities Net Income Stockholders' Equity: Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and    Stockholders' Equity Prepare the closing entries at July 31 in the General Journal below. General Journal Date Description (Account Name) Debit Credit Requirement #9: Post the closing entries to the General Ledger T-accounts and compute ending balances. Just add to the adjusted balances already listed. Prepare a post-closing trial balance as of July 31 in the space below. Quick Tax Corporation Post-Closing Trial Balance July 31 0 0

Explanation / Answer

Journal entries for the above transactions General Journal Debit Credit 1 Bank $40,000    Common stock $40,000 (To record common stock sold in exchange of cash deposited in Bank account) 2 Rent $2,500      Cash $2,500 (Paid current months' rent) 3 Prepaid Insurance $3,600      Cash $3,600 (To record cash paid 1 year insurance policy) 4 Supplies $700      Accounts payable $700 (To record purchase of supplies on account) 5 Salaries $2,800        Cash $2,800 (To record salaries) 6 Equipment $9,500       Cash $1,500       Accounts payable $8,000 7 Cash $6,500       Service Revenue $6,500 (To record cash received for preparing tax returns) 8 Accounts payable $500     Cash $500 (To record payment made to Lake Company for supplies) 9 Cash $8,250          Service Revenue $8,250 (To record cash received for preparing tax returns) 10 Dividend paid $450        Cash $450 (To record dividend declared and paid) Trial Balance for Quick Tax Corporation as of July 31 Particulars Debit Credit Cash & bank $43,400 Common Stock $40,000 Accounts payable $8,200 Equipment $9,500 Supplies $700 Prepaid Insurance $3,300 Accumulated Depreciation $79 Dividend paid $450 Service Revenue $14,750 Rent $2,500 Insurance Expenses $300 Salaries $2,800 Depreciation $79 Total $63,029 $63,029 Income Statement For the month ending July 31 Revenues: Revenue $14,750 Expenses: Rent $2,500 Salaries $2,800 Insurance $300 Supplies $700 Depreciation $79 Income tax expenses @ 35% $2,930 Total expenses $9,309 Net Income $5,441 Statement of Retained Earnings Retained Earnings, July 1 0 Add: Net Income $5,441 Subtotal $5,441 Less: Dividend Paid $450 Retained Earnings, July 31 $4,991 Balance Sheet 31-Jul Assets: Cash $43,400 Supplies 0 Prepaid Insurance $3,300 Equipment $9,500 Less: Accumulated Depreciation ($79) Total Assets $56,121 Liabilities: Accounts payable $8,200 Income tax payable $2,930 Total Liabilties $11,130 Stockholder's Equity Common Stock $40,000 Retained Earnings $4,991 Total Stockholder's Equity $44,991 Total Liabilities & Stockholders Equity $56,121 Closing Entries Sercive Revenue $14,750       Income Summary $14,750 Income Summary $9,309 Rent $2,500 Salaries $2,800 Insurance $300 Supplies $700 Depreciation $79 Income tax expenses @ 35% $2,930 Retained Earnings $5,441        Income Summary $5,441 Adjusted Trial Balance for Quick Tax Corporation as of July 31 Particulars Debit Credit Cash & bank $43,400 Common Stock $40,000 Retained Earnings $4,991 Accounts payable $8,200 Income Tax payable $2,930 Equipment $9,500 Prepaid Insurance $3,300 Accumulated Depreciation $79 Total $56,200 $56,200 It is assumed all the supplies consumed in the current month It is assumed that equipment is depreciated on straight line basis for 10 years with no salvage value $9500/10 years x 1/12 = $79

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