Exercise 1(70 points): On 1st of May Mark starts a new company of advertising services called MARK IT ALL, Ltd. and realized the following transactions: 3 of May: MARK IT ALL, Ltd. issued to Jason 20,000 shares in exchange of $60,000 of share capital 3th of May: MARK IT ALL, Ltd signs a renting contract for the offices. The price of the rent is $12,000 semi-annually payable at the beginning of every semester. The company pays $12,000 the days of the contract. 4th of May: MARK IT ALL, Ltd purchased furniture to FURNISH YOUR OFFICE, Inc. for $6,000. MARK IT ALL, Ltd paid $2,000 in cash, the remaining $4,000 will have to be paid by the end of the month. The company decides to record the purchase of the furniture as an operating expense of the month instead of capitalizing it. 4th of May: MARK IT ALL, Ltd, signs a 12 months insurance contract for $3,600 paid cash the same day. 5th of May: MARK IT ALL, Ltd purchased a computer system on account to CPU WORLD, Inc for $20,000, to be paid in July. The useful life the computer system is estimated to 5 years, no salvage value. 6th of May: MARK IT ALL, Ltd makes some installations in the office for $2,500 paid in cash 7th of May: MARK IT ALL, Ltd hires one employees with a salary $3,000/ month. Salaries are paid on the following day 2 of each month. Additionally, the company will have to pay the 10th day of the following month 25% of the salaries amounts as a social security contribution. 8 of May: MARK IT ALL, Ltd Signs a contract for a work to perform for the first client: Mr. BEGGIN. The fees amount to $38,000 paid in cash at the day of the signing of the contract. The work must be delivered at the end of the month 12 of May: BIG OPPORTUNITY, Inc. hires MARK IT ALL, Ltd for a 12 month advertising campaign. Fees will amount to $62,000 every month, payable the day 10 of the following month 29th of May: MARK IT ALL, Ltd. delivers the work done to MR. BEGGIN paid on May 8th 30 of May: The company receives an electricity bill for $2,500 payable in June 31 of May: MARK IT ALL, Ltd records the sales of the month of April that amount to $136,000. All sales have been paid in cash. 1. Record the transactions of the company on the General Journal points) 2. Prepare the adjusting entries to be made at the end of the month of May (10 points) 3. Prepare an Income statement at May 30. (10 points) 4. Prepare the closing entries at May 30 (20 points) 5. Prepare the Balance sheet at June 1 (20 points) Exercise 2 (30 points): Jacob and sons, Inc is a grocery store that purchased on January 1st a new vehicle for the delivery of clients. The price of the vehicle if $50,000. The company estimates the useful life or 6 years and a salvage value of $2,000. a In order to finance the purchase the company issued a 5% note payable. Interests are paid every 1st of January of the following year. On 1st of June the company contracted a 12 months insurance policy for $1.800. At 31st of November the company had received an order from a client for $20,000. The client has made the payment and the merchandise has been delivered on 31st of December. 1. Prepare the journal entries of all the above mentioned transactions (purchase of the vehicle, issuance of the note payable, prepayment of the insurance, and advance payment from the client. (15 point) 2. Prepare the adjusting entries to be made on 31st of December (depreciation, interest, insurance, unearned revenue) (15 point)
