Comprehensive Problem Instructions

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Quality Exteriors creates architectural renderings for exclusive homes. The Company$$s post$-$closing trial balance as of December $31,2023$ is given below.

Account DR CR

Cash $$45,020$

Accounts receivable $49,440$

Drafting supplies $21,630$

Prepaid insurance $6,180$

Prepaid rent $4,120$

Equipment $31,930$

Accumulated depreciation $$14,120$

Accounts payable $7,210$

Salaries payable $2,060$

Unearned fees $5,150$

Long$-$term notes payable $0$

Common stock $51,500$

Retained earnings $78,280$

$$158,320$ $$158,320$

Quality had the following transactions during $2024($not in date order$)$:

a$.$ Quality collected $$74,160$ on accounts receivable during the year.

b$.$ The company created architectural renderings for clients totaling $$115,360$ in fees earned. $$62,120$ was collected in cash, with the remainder on account.

c$.$ Quality purchased $$72,100$ worth of supplies during the year. $$20,600$ was paid in cash and the remainder was purchased on account. Record the purchase in the Supplies Expense account.

d$.$ The company paid $$48,410$ on accounts payable during the year.

e$.$ On August $1$ Quality paid its $$24,720$ annual insurance premium. Record this payment as Prepaid Insurance.

f$.$ During the year Quality paid $$18,540$ of rent for office space. Record this payment as Rent Expense.

g$.$ Quality paid its employees total cash salaries of $$42,230.$ This $$42,230$ includes the balance in salaries payable from the beginning of the year.

h$.$ On April $1$ the company purchased a new computer design system for $$30,900.$ $$5,150$ was paid in cash and the company issued a long$-$term note with an $8\%$ annual interest rate for the balance. The system will last several years so it should be recorded a fixed asset, not as supplies.

i$.$ Quality paid cash dividends to shareholders totaling $$4,120.$

Instructions

$1.$ Prepare the Journal entry for each transaction $($a $$ i$)$ in the journal $($Journal tab of the Working Papers$).$ The first transaction is journalized and posted for you.

$2.$ Post the journalized transactions to the general ledger $($T$-$accounts$),$ identifying the transactions using their respective letters a$.$ thru i$.($Ledger tab of the Working Papers$).$ Transaction a$.$ has been posted.

$3.$ After computing balances in the ledger, prepare a trial balance as of December $31,2024($Trial Balances & Statements tab of the Working Papers$).$ Column totals should equal $$300,460.$

$4.$ Using the adjustment data below, prepare adjusting entries $($Journal tab of the Working Papers$).$

j$.$ Quality completed and delivered the architectural renderings for which they had been paid in advance during $2023.$

k$.$ Supplies that cost $$34,000$ were left on hand at year$-$end.

l$.$ $$11,330$ of the cash received for printing jobs in transaction b$.$ had not been earned by December $31,2024.$ It was for work that Quality would complete during $2025.$

m$.$ Interest should be accrued on the note in transaction h$.$ The note was issued on April $1$ and bears an annual interest rate of $8\%.$

n$.$ Rent that applies to $2025$ is $$7,210.$

o$.$ Prepaid insurance at the beginning of the year has completely expired. In addition, the premium payment made in transaction $$e$$ was made on August $1$ and covers $12$ months. As a result, part of that payment has also expired. Your adjusting entry should record the expiration of the prior year prepaid insurance plus the amount of the current year premium that has expired.

p$.$ Depreciation on the equipment is $$8,240$ for the year.

q$.$ At the end of the year, Quality had provided $$15,450$ of services which had not been billed or recorded yet.

r$.$ Salaries of $$5,120$ were owed to employees at year$-$end $($earned by employees but not paid by the end of the year$).$

$5.$ Post the adjusting entries to the general ledger $($Ledger tab of the Working Papers$)$ and enter the adjusted balances in each account. Prepare an adjusted trial balance as of December $31,2024($Trial Balances & Statements tab of the Working Papers$).$

$6.$ Prepare an Income Statement, Statement of Retained Earnings, and Balance Sheet $($Trial Balances & Statements tab of the Working Papers$).$ Use proper headings, $ signs, underlines, and other formats based on the examples in the handouts. Be sure to report a subtotal for Total Current Assets. The ending balance in Retained Earnings should be $$52,055.$

$7.$ Prepare closing entries $($Journal tab of the Working Papers$)$ and post them to the general ledger $($Ledger tab of the Working Papers$).$ Show ending balances in all ledger accounts.

$8.$ Prepare a post$-$closing trial balance $($Trial Balances & Statements tab of the Working Papers$).$