Emily Corp

Beginning

Balances

1-Feb-09

Debit

Credit

Cash

10300

Accounts Receivable

6000

Allowance for doubtful accounts

60

Office Supplies

250

Inventory

1000

Prepaid Insurance

2000

Accounts Payable

3000

Interest Payable

50

Note Payable

10000

Stock

1000

Retained Earnings

5440

19550

19550

The beginning inventory consists of 100 units @ $10 each

The company uses the FIFO perpetual inventory assumption

The transactions for the month were:

Purchase a computer for the company (paid cash) $2700

Paid salary of $1200

Paid cash for utility expense $200

Paid cash for rent expense $1500

Received cash from customer for work done previously (accounts receivable) $5,000

Paid accounts payable amounts $3000

Purchased office supplies on account $200

Purchased inventory on account 300 units $3300

Cash sales were 250 units, $5000

Purchased inventory for cash 350 units $4200

Credit sales were 400 units $8000

Required:

Record the transaction (journal entries)

Post the transactions to the ledger (T accounts)

Prepare trial balance

Record adjusting journal entries for February 28:

The prepaid insurance was paid October 1st for 6 months

Supplies on hand at the end of the month are $225

The note payable was signed December 31st. It bears an interest rate of 6%. The note is due in 18 months.

Record depreciation, the computer has an estimated life of 3 years and no salvage value.

The company uses straight line method of depreciation

Assume the computer was purchased on the first day of the month

The company estimates that 1% of accounts receivable will not be collectable

Post the adjusting entries to the ledger (T accounts)

Prepare an adjusted trial balance

Prepare the February 28 financial statements:

Multi Step Income

Statement

Statement of retained earnings

Classified Balance Sheet