Record adjustments and prepare financial statements. (LO 1, 2, 3, 4)

The accounting records for Beta Company contained the following balances as of December 31,2008 :

The following accounting events apply to Beta's 2009 fiscal year:

a. Jan. 1 Beta purchased a computer that cost \(\$ 18,000\) for cash. The computer had a no salvage value and a 3-year useful life.

b. Mar. 1 The company borrowed \(\$ 20,000\) by issuing a 2 -year note at \(12 \%\).

c. May 1 The company paid \(\$ 6,000\) cash in advance for a 6 -month lease starting on July 1 for office space.

d. June 1 The company declared and paid dividends of \(\$ 2,000\) to the owners.

e. July 1 The company purchased land that cost \(\$ 15,000\) cash.

f. Aug. 1 Cash payments on accounts payable amounted to \(\$ 5,500\).
g. Aug. 1 Beta received \(\$ 13,200\) cash in advance for 12 months of service to be performed monthly for the next year, beginning on receipt of payment.
h. Sept. 1 Beta sold a parcel of land for \(\$ 13,000\), its original cost of the land.
i. Oct. 1 Beta purchased \(\$ 1,300\) of supplies on account.
j. Nov. 1 Beta purchased short-term investments for \(\$ 10,000\). The investments earn a fixed rate of \(5 \%\) per year.
k. Dec. 31 The company earned service revenue on account during the year that amounted to \(\$ 50,000\).
1. Dec. 31 Cash collections from accounts receivable amounted to \(\$ 46,000\).
m. Dec. 31 The company incurred other operating expenses on account during the year that amounted to \(\$ 5,850\).
Additional information:
1. Salaries that had been earned by the sales staff but not yet paid amounted to \(\$ 2,300\).
2. Supplies on hand at the end of the period totaled \(\$ 200\).
3. The beginning balance of \(\$ 3,600\) in prepaid rent was completely used up by the end of the year.
\section*{Required}

a. Set up an accounting equation worksheet and record the account balances as of December 31, 2008.

b. Record the transactions that occurred during 2009 and the necessary adjustments at year-end.

c. Prepare all four financial statements for the year ended December 31, 2009 (balance sheet at December 31, 2009).

Transcribed Image Text:

Assets Liabilities and Shareholders' Equity Cash $50,000 Accounts payable $17,500 Accounts receivable 26,500 Prepaid rent 3,600 Common stock 48,600 Land 10,500 Retained earnings 24,500 Totals $90,600 $90,600