At June 30, 2017, the end of its most recent fiscal year, Culver Computer Consul
ID: 2573486 • Letter: A
Question
At June 30, 2017, the end of its most recent fiscal year, Culver Computer Consultants’ post-closing trial balance was as follows:
Debit
Credit
Cash
$5,860
Accounts receivable
1,340
Supplies
770
Accounts payable
$450
Unearned service revenue
1,250
Common stock
4,000
Retained earnings
2,270
$7,970
$7,970
The company underwent a major expansion in July. New staff was hired and more financing was obtained. Culver conducted the following transactions during July 2017, and adjusts its accounts monthly.
July
1
Purchased equipment, paying $4,000 cash and signing a 2-year note payable for $22,400. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
2
Issued 22,400 shares of common stock for $56,000 cash.
3
Paid $4,200 cash for a 12-month insurance policy effective July 1.
3
Paid the first 2 (July and August 2017) months’ rent for an annual lease of office space for $4,500 per month.
6
Paid $4,300 for supplies.
9
Visited client offices and agreed on the terms of a consulting project. Culver will bill the client, Connor Productions, on the 20th of each month for services performed.
10
Collected $1,340 cash on account from Milani Brothers. This client was billed in June when Culver performed the service.
13
Performed services for Fitzgerald Enterprises. This client paid $1,250 in advance last month. All services relating to this payment are now completed.
14
Paid $450 cash for a utility bill. This related to June utilities that were accrued at the end of June.
16
Met with a new client, Thunder Bay Technologies. Received $13,400 cash in advance for future services to be performed.
18
Paid semi-monthly salaries for $12,300.
20
Performed services worth $31,400 on account and billed customers.
20
Received a bill for $2,500 for advertising services received during July. The amount is not due until August 15.
23
Performed the first phase of the project for Thunder Bay Technologies. Recognized $11,200 of revenue from the cash advance received July 16.
27
Received $16,800 cash from customers billed on July 20.
Adjustment data:
1.
Adjustment of prepaid insurance.
2.
Adjustment of prepaid rent.
3.
Supplies used, $1,400.
4.
Equipment depreciation, $550 per month.
5.
Accrual of interest on note payable.
6.
Salaries for the second half of July, $12,300, to be paid on August 1.
7.
Estimated utilities expense for July, $900 (invoice will be received in August).
8.
Income tax for July, $1,340, will be paid in August
Enter the July 1 balances in the ledger accounts
Debit
Credit
Cash
$5,860
Accounts receivable
1,340
Supplies
770
Accounts payable
$450
Unearned service revenue
1,250
Common stock
4,000
Retained earnings
2,270
$7,970
$7,970
Explanation / Answer
JOURNAL
Date
Accounts
Debit
Credit
July. 1
Equipment
$26,400
Cash
$4,000
Note payable
$22,400
July. 2
Cash
$56,000
Common stock
$56,000
July. 3
Prepaid Insurance
$4,200
Cash
$4,200
July. 3
Prepaid rent
$900
Cash
$900
July. 6
Supplies
$4,300
Cash
$4,300
July. 10
Cash
$1,340
Accounts receivable
$1,340
July. 13
Unearned service revenue
$1,250
Service revenue
$1,250
July. 14
Accounts Payable
$450
Cash
$450
July. 16
Cash
$13,400
Unearned service revenue
$13,400
July. 18
Salary expense
$12,300
Cash
$12,300
July. 20
Accounts receivable
$31,400
Service revenue
$31,400
Jul-20
Advertising expense
$2,500
Accounts payable
$2,500
July. 23
Unearned service revenue
$11,200
Service revenue
$11,200
July. 27
Cash
$16,800
Accounts receivable
$16,800
Adjusting Entries
July. 31
Insurance expense
$350
Prepaid Insurance
$350
July. 31
Rent Expense
$4,500
Prepaid rent
$4,500
July. 31
Supplies expense
$1,400
Supplies
$1,400
July. 31
Depreciation expense
$550
Accumulated depreciation - equipment
$550
July. 31
Interest expense
$112
Interest payable
$112
July. 31
Salary expense
$12,300
Salary payable
$12,300
July. 31
Utilities expense
$900
Accounts payable
$900
July. 31
Income tax expense
$1,340
Income tax payable
$1,340
JOURNAL
Date
Accounts
Debit
Credit
July. 1
Equipment
$26,400
Cash
$4,000
Note payable
$22,400
July. 2
Cash
$56,000
Common stock
$56,000
July. 3
Prepaid Insurance
$4,200
Cash
$4,200
July. 3
Prepaid rent
$900
Cash
$900
July. 6
Supplies
$4,300
Cash
$4,300
July. 10
Cash
$1,340
Accounts receivable
$1,340
July. 13
Unearned service revenue
$1,250
Service revenue
$1,250
July. 14
Accounts Payable
$450
Cash
$450
July. 16
Cash
$13,400
Unearned service revenue
$13,400
July. 18
Salary expense
$12,300
Cash
$12,300
July. 20
Accounts receivable
$31,400
Service revenue
$31,400
Jul-20
Advertising expense
$2,500
Accounts payable
$2,500
July. 23
Unearned service revenue
$11,200
Service revenue
$11,200
July. 27
Cash
$16,800
Accounts receivable
$16,800
Adjusting Entries
July. 31
Insurance expense
$350
Prepaid Insurance
$350
July. 31
Rent Expense
$4,500
Prepaid rent
$4,500
July. 31
Supplies expense
$1,400
Supplies
$1,400
July. 31
Depreciation expense
$550
Accumulated depreciation - equipment
$550
July. 31
Interest expense
$112
Interest payable
$112
July. 31
Salary expense
$12,300
Salary payable
$12,300
July. 31
Utilities expense
$900
Accounts payable
$900
July. 31
Income tax expense
$1,340
Income tax payable
$1,340
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