Question
Beverly Smith and Josh Brown established a CPA firm called Smith and Brown, Inc. on January 1, 20X3. The firm will use the accrual basis
Beverly Smith and Josh Brown established a CPA firm called Smith and Brown, Inc. on January 1, 20X3. The firm will use the accrual basis of accounting. The following transactions were completed during its first month of operations.
a. | The CPA firm was established when the two owners each contributed $20,000 cash in exchange for capital (common) no-par stock.
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b. | The company signed a lease for office space in downtown Pueblo, CO. On January 1, 20X3, $3,000 rent was paid for the two months rent.
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c. | On January 1, 20X3, the company purchased a one-year insurance policy for $6,000. |
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d. | On January 1, 20X3, the company borrowed $4,000 by signing a one-year note with a bank. The bank will be charging the company 10% interest. Both interest and principal are due when the note matures on January 1, 20X4. |
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e. | On January 9, 20X3, the CPAs performed services for a customer and received $2,000 cash.
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f. | On January 11, 20X3, the CPAs performed services for a customer worth $3,000. The customer was sent a bill, but the customer will not pay for these services until next month.
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g. | On January 13, 20X3, a customer gave the company $2,000 as a retainer for services that will be performed during the months of January and February. One-half will be performed in January.
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h. | On January 30, 20X3, the company paid $5,000 for salaries.
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i. | From January 14 30, cash received from customers for work performed totaled $20,000.
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j. | On January 30, 20X3, the company received a $500 bill for utilities used during the first half of January. The company will pay the bill when it becomes due on February 10, 20X3. |
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k. | Paid a dividend to the stockholders totaling $1,000. |
Required:
- Prepare the journal entries and adjusting journal entries for the above transactions.
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