Comprehensive Problem

On July 31, 2020, the end of its most recent fiscal year, Elizabeth River Business Consultants' post-closing trial balance was as follows:

Accounts	Debit	Credit
Cash	$ 26,150
Accounts receivable	6,000
Supplies	3,450
Utility Expense Payable		$ 2,000
Unearned service revenue		5,600
Common stock		18,000
Retained earnings		10,000
	$ 35,600	$ 35,600

The company engaged in the following transactions during August 2020, and adjusts its accounts monthly:

Date	Transaction/Events
August 1	Purchased Equipment, paid $20,000 cash, and signing a 2-year note payable for $100,000. The equipment has a 4-year useful life. The note has a 6% interest rate, which is payable on the first day of each following month.
2	Issued 20,000 shares of common stock for $250,000 cash.
3	Paid $18,000 cash for a 12-month insurance policy effective August 1.
3	Paid two months' rent for August and September at an annual lease of office space for $20,000 per month.
6	Paid $19,000 for supplies.
9	Visited client offices and agreed on the terms of a consulting project. Elizabeth River will bill the client every month on the 20th of each month for services performed.
10	Collected $6,000 cash on account from Niki Brothers. This client was billed in July when Elizabeth River performed the service.
13	Performed services for Jedai Enterprises. This client paid $5,600 in advance last month. All services relating to this payment are now complete.
14	Paid $2,000 cash for a utility bill. This is related to July utilities that were accrued at the end of July.
16	Signed a contract with a new client, Tina Technologies. Received $60,000 cash in advance for future services to be performed.
18	Paid semi-monthly salaries for $ 55,000
20	Performed services worth $ 140,000 on the account and customers were billed.
20	Received a bill for $11,000 for advertising services received during August, but the amount is not due until September 15.
23	Completed the part of the project for Tina Technologies. Recognized $50,000 of revenue from the cash advance received on August 16.
27	Received $75,000 in cash from customers who were billed on August 20.
31	Declared and paid dividends of $2,000

Adjustment data:

1. Adjustment of prepaid insurance for the expired portion.
2. Adjustment of prepaid rent for the expired portion.
3. Supplies used during the month were $6,250.
4. Depreciate Equipment for the month of August.
5. Accrual of interest on the note payable. (Hint: Principal x Rate x Time to compute interest.)
6. Salaries for the second half of August accrued $55,000, to be paid on September 1.
7. Estimated utility expense for August accrued, $ 4,000 (invoice will be received next month).
8. Income tax expense for August, $6,000, will be paid in September.

The chart of accounts for Elizabeth River Business Consultants contains the following accounts:

Code	Account Head
101	Cash
102	Accounts Receivable
103	Supplies
104	Prepaid Insurance
105	Prepaid Rent
106	Equipment
107	Accumulated DepreciationEquipment
201	Advertising Expense Payable
202	Notes Payable
203	Interest Payable
204	Income Taxes Payable
205	Salaries and Wages Payable
206	Unearned Service Revenue
207	Utility Expense Payable
301	Common Stock
302	Retained Earnings
303	Dividends
304	Income Summary
401	Service Revenue
501	Supplies Expense
502	Depreciation Expense
503	Insurance Expense
504	Salaries and Wages Expense
505	Advertising Expense
506	Income Tax Expense
507	Interest Expense
508	Rent Expense
509	Utility Expense

Required:

Part 1: Enter the August 1 balances in the ledger accounts; journalize the August transactions and events, post the journals into ledger accounts, and prepare an unadjusted trial balance at August 31

Part 2: Journalize and post the adjusting entries for the month ending August 31. Also, prepare an adjusted trial balance (use Worksheet to populate the adjustments).

Part 3: Use the Work Sheet prepared in Part 2 to the extent of Income Statement and Balance Sheet and prepare an appropriately formatted income statement, retained earnings statement, and a classified Balance Sheet at August 31. Also, journalize and post-closing entries and complete the closing process and prepare a post-closing trial balance on August 31.

Part 4: Prepare a Statement of Cash Flows for August from the other financial statements prepared in Part 3.