Software Advisors Limited was organized on January 1, 2018. The company plans to use the following chart of accounts:

100 Cash

110 Accounts Receivable

120 Supplies

130 Prepaid Insurance

200 Equipment

300 Accounts Payable

310 Bank Loan Payable (non-current)

400 Common Shares

450 Retained Earnings

490 Dividends Declared

500 Service Revenue

700 Advertising Expense

710 Salaries Expense

720 Interest Expense

730 Office Expense

740 Rent Expense

900 Income Tax Expense

The company had the following transactions in the month of January:

Jan. 2 Issued 1,000 common shares for $65 each.

4 Finalized a lease for office space and paid the first month's rent of $3,000.

5 Purchased $40,000 of equipment for $10,000 cash and financed the remainder with a long-term bank loan.

8 Paid for an advertisement in a local paper, $500.

Jan. 10Purchased supplies on account, $1,000.

11 Paid for several advertising spots on the local radio station, $3,000.

12 Paid employees $7,500 for the first two weeks of work.

15 Summarized and recorded the billings to clients for the first two weeks of January. Billings totalled $15,000. These amounts are due by the 12th of the next month.

17 Paid $1,000 for office expenses.

19 Paid annual insurance policy with coverage up to December 31, 2018, for $6,000.

24 Received $10,000 from clients in partial settlement of accounts billed on the 15th.

25 Declared and paid $500 of dividends to shareholders.

26 Paid employees $7,500 for the previous two weeks of work.

29 Summarized and recorded the billings to clients for the prior two weeks. Billings totalled $18,000. These amounts are due by the 26th of the next month.

30 Made a payment to the bank of $200 for interest on the bank loan and $700 to pay on the amount owing for the bank loan.

31 Paid Canada Revenue Agency $1,500 for an income tax instalment.

Instructions

(a) Journalize the transactions.

(b) Set up T accounts and post the journal entries prepared in part (a).

(c) Prepare a trial balance.

(d) Prepare an income statement, statement of changes in equity, and statement of financial position for January.