accounting

Exercise V

The Accounting Cycle – Problem Set ABC Company Ltd.

Balance Sheet on Nov. 30, 2014
Assets		Equities
Equipment	2 000	Paid-in Capital	3 000
Land	2 500	Retained Earnings	1 000
Office Supplies Inventory	1 200	Loan Payable	2 400
Accounts Receivable	3 600	Tax payables	900
Cash, Bank	3 900	Accounts payable	3 700
Prepaid expenses	3 000	Salary payable	1 200
		Unearned rent revenue	4 000
Total assets	16 200	Total equities	16 200

Summary of transactions during December:

1. Cash-Purchase of € 1 800 of Office Supplies Inventory

2. Performed consulting services, for which we received € 2,100 cash immediately.

3. Received an invoice for a series of advertisements, € 1 200, that appeared in the local news during December and will be paid in January.

4. Performed advertisement services for Customer XYZ, for which we will receive € 3,000 on 2 month credit sale.

5. Paid salaries to employees of € 1 200 for December.

6. Received an invoice for external services of € 1 400 for December to be paid with 60 credit term

7. Paid outstanding tax payables.

8. Paid trade creditors € 1,300.

9. Account for salaries that have been executed in December for the amount of € 1 300.

10. The cost of office supplies used during December is € 1,100.

11. In the beginning of September 2014 a subscription rights for local newspaper magazine of € 6 000 was paid for half-a year term in advance;

12. In the beginning of October 2014 company receives rent for 6 months in advance, €6,000

13. At the end of the month Company repaid to the Bank credit tranche 500 and paid interest charges (interest rate as of 10 % p.a.)

14. Depreciation of equipment for December amounts to € 100.

Required:

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

b) Prepare the journal entries for the transactions (1. – 14) 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.