Basic Accounting Brief Cycle Problem (Vanity Fair) Vanity Fair has the following

Question

Basic Accounting Brief Cycle Problem (Vanity Fair) Vanity Fair has the following balances as of January 1, 20x1: Account Dr. Cr. $59,750 Cash Accounts Receivable Prepaid Insurance Equipment Accum. Depr.- Equipment 3,300 1,200 64,600 S 2,000 29,230 23,000 Land Accounts Payable Unearned Revenue Notes Payable Contributed Capital 1,500 74,000 5,000 40,120 Retained Earnings Totals S 151,850 151,850 The following transactions occurred during 20X1 1. Sold $180,000 of subscriptions during the year. Cash was collected at the time of sale and magazines will be sent on a monthly basis. 2. Along with seliling magazine subscriptions, magazines and periodicals are delivered to retail stores on a weekly basis. Vanity Fair bills these customers for magazines delivered. $25,000 was billed during the year. Collected $13,500 on account. Paid $4,000 of utility expenses during the year. On 3/31 Vanity Fair paid $12,000 for one year of rent for a factory. On 3/31, purchased a two-year insurance policy covering the equipment in Vanity Fair's factory. Paid $7,200 Vanity Fair paid $78,000 of salaries during the year. Vanity Fair paid $3,000 in dividends. 4. 5. 6. 7. 8. End of the year - Adjusting entries: Of the unearned income, it is determined that Vanity Fair owes customers 7200 magazines at $5.00 each. in an analysis of prepaid insurance it is determined that all of the beginning balance was used along with nine month of the insurance purchased in the current year. The Note Payable incurred 8% interest. No interest was paid during the year. Vanity Fair has estimated that they owe $200 of utility expense at the end of the year. As of 12/31/09 Vanity Fair owes employees $700 for salaries not yet paid. Depreciation on Equipment is $2,000. A. B. C. D. E. F. G. Booked Rent Expense. 1% of A/R won't be celected H, Required 1. Set up T accounts with their beginning balances. Journalize Vanity Fair's transactions for the year. Post the journal entries into the T accounts 1 800 2. 3. 4. Prepare a trial balance. z whas

Explanation / Answer

2… Sl.No. Account Title Debit Credit 1 Cash 180000 Unearned Revenue 180000 2 Accounts receivable 25000 Subscriptions Revenue 25000 3 Cash 13500 Accounts receivable 13500 4 Utility expenses 4000 Cash 4000 5 Rent expense 12000 Cash 12000 6 Insurance expense 7200 Cash 7200 2 year insurance 7 Salaries expense 78000 Cash 78000 8 Dividends 3000 Cash 3000 Adjusting Entries A Unearned Revenue 36000 Subscriptions Revenue 36000 7200*5 B Insurance expense 1200 Prepaid Insurance 1200 (Last Year) Prepaid Insurance 4500 Insurance expense 4500 7200/24=300*(24-9)mths. C Interest Expense 5920 Interest payable 5920 74000*8% D Utility expenses 200 Accounts Payable 200 E Salaries expense 700 Salaries payable 700 F Depreciation expense 2000 Acc. Depn.-Eqpt. 2000 G Prepaid rent 3000 Rent Expense 3000 12000/12*3 H Accounts receivable 148 Allowance for doubtful accounts 148 (3300+25000-13500)*1% 376368 376368 1&3.. LEDGER ACCOUNTS Net Ledger balances Sl.No. Account Title Debit Credit Debit Credit Beginning balance 2000 F Acc. Depn.-Eqpt. 2000 4000 Beginning balance 29230 D Accounts Payable 200 29430 Beginning balance 3300 2 Accounts receivable 25000 3 Accounts receivable 13500 H Accounts receivable 148 14948 H Allowance for doubtful accounts 148 148 Beginning balance 59750 1 Cash 180000 3 Cash 13500 4 Cash 4000 5 Cash 12000 6 Cash 7200 7 Cash 78000 8 Cash 3000 149050 Contributed Capital Beginning balance 5000 5000 F Depreciation expense 2000 2000 8 Dividends 3000 3000 Equipment Beginning balance 64600 64600 Land Beginning balance 23000 23000 6 Insurance expense 7200 B Insurance expense 1200 B Insurance expense 4500 3900 C Interest Expense 5920 5920 C Interest payable 5920 5920 Notes Payable Beginning balance 74000 74000 Beginning balance 1200 B Prepaid Insurance 1200 B Prepaid Insurance 4500 4500 G Prepaid rent 3000 3000 5 Rent expense 12000 G Rent Expense 3000 9000 Retained earnings Beginning Balance 40120 40120 7 Salaries expense 78000 E Salaries expense 700 78700 E Salaries payable 700 700 2 Subscriptions Revenue 25000 A Subscriptions Revenue 36000 61000 Beginning Balance 1500 1 Unearned Revenue 180000 A Unearned Revenue 36000 145500 4 Utility expenses 4000 D Utility expenses 200 4200 528218 528218 365818 365818 4..Trial Balance Account Titles Debit Credit Cash 149050 Accounts receivable 14948 Allowance for doubtful accounts 148 Prepaid Insurance 4500 Prepaid rent 3000 Land 23000 Equipment 64600 Acc. Depn.-Eqpt. 4000 Accounts Payable 29430 Salaries payable 700 Unearned Revenue 145500 Interest payable 5920 Notes Payable 74000 Contributed Capital 5000 Retained earnings 40120 Subscriptions Revenue 61000 Utility expenses 4200 Rent Expense 9000 Salaries expense 78700 Insurance expense 3900 Depreciation expense 2000 Interest Expense 5920 Dividends 3000 Total 365818 365818

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