accounting

Exercise II

Accounting Cycle

The Accounting Cycle – Problem Set ABC Company Ltd.

Balance Sheet on Nov. 30, 2014
Assets		Equities
Equipment	6 000	Paid-in Capital	5 000
Office Supplies Inventory	1 000	Retained Earnings	3 600
Accounts Receivable	1 000	Tax payable	1 000
Cash, Bank	8 600	Accounts payable	7 000
Total assets	16 600	Total equities	16 600

Summary of transactions during December:

1. Performed consulting services, for which we received € 2,000 cash immediately.

2. Received an invoice for a series of advertisements, € 600, that appeared in the local news during December and will be paid in January.

3. Performed additional consulting work, € 2 500 on credit.

4. Issued a check for € 800 for rent of shop space for December.

5. Performed advertisement services, for which we received € 1,000 cash immediately.

6. Paid salaries to employees of € 2,000 for December.

7. Paid outstanding tax € 1 000

8. Paid creditors € 2,800.

9. The cost of office supplies used during December is € 450.

10. Depreciation of equipment for December amounts to € 150.

Required:

a) Prepare the opening journal entry on Dec. 1, 2014.

b) Prepare the journal entries for the transactions (1. – 10.) for the month of December and post them to the T-accounts, opening additional T-accounts for accounts as needed. Cross-reference the entries using the numbers of the transactions above.

c) Prepare a trial balance.

d) Prepare the adjusting journal entries and record them at the end of December in the T-accounts as well as in the trial balance.

e) Prepare the closing entries for the temporary accounts and the Income Statement.

f) Prepare the closing entries for the permanent accounts and the Balance Sheet as of Dec. 31, 2014.