Balance Sheet,Income Statement and Journal Entries-4 exercises-MBA-Accounting

Problem Set

Worth 60 points due at the end of Week 2

Be sure to include a cover page for this assignment.

Part I – Booking Transactions using Journal Entries

The Topanga Company provides legal services to its customers. At the beginning of 2016, the company had the following balances in its financial accounting records:

DEBIT CREDIT

Cash $16,200

Accounts Receivable $1,800

Building $4,800

Accumulated Depreciation – Building $2,800

Notes Payable $2,000

Common Stock $15,000

Retained Earnings $3,000

· Notes Payable represents money that won’t need to be paid back for a long time. The company pays interest (in cash) every December 31 at a rate of 9%.

· Building was purchased 28 years ago and is expected to last another 20 years (a total of 48 years)

For each of the transactions below, write journal entries in a manner that makes it CLEAR which accounts are debited and which are credited. Failure to do this will be rewarded with NO credit.

Transaction 1: On April 1, the company pays 3 years of rent in advance with $7,200 cash.

Transaction 2: On April 11, the company buys $20,000 of Inventory and the supplier trusts them to eventually pay (credit Accounts Payable).

Transaction 3: On May 1, the company finds someone willing to buy $4,000 of Inventory for $14,000. The company delivers it immediately. The customer puts down $8,000 in Cash immediately AND is known to have excellent credit scores.

Transaction 4: On August 26, the company gets a Utilities bill for $3,000 and pays it immediately.

Transaction 5: On December 15, the company pays $2,000 (Cash) for some the Inventory it bought on April 11.

Transaction 6: On December 15, the company pays out a $1,000 cash dividend to its owners.

Part II – Booking Adjustments

Now, it is December 31, 2016. For each of the transactions below, write journal entries in a manner that makes it CLEAR which accounts are debited and which are credited. Failure to do this will be rewarded with NO credit.

· 9 months of the rent purchased on April 1 has been “used up”

· Deal with Annual Depreciation

· Deal with Annual Interest on the Note Payable

Part III – Preparing Financial Statements

1. Prepare a well-formatted Income Statement for The Topanga Company for the year ended December 31, 2016.

The Topanga Company

Income Statement

For the Year Ended December 31, 2016

2. Prepare a well-formatted Balance Sheet for The Topanga Company as of December 31, 2016.

The Topanga Company

Balance Sheet

As of December 31, 2016