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P2-2 Preparing journal entries and statement (LO 3, II) a. On January 1, 2014, Frances Corporation started doing business and the owners contrib- b. The company paid $24,000 to cover the rent for the office space for the 24-month period c. On March 1, 2014, MSK Inc, entered into a consulting contract under which Frances uted $200,000 capital in cash. from January 1, 2014, to December 31, 2015 Corporation promised to provide consulting to MSK Inc. for the 10-month period from March 1, 2014, to December 31, 2014. In return, MSK promised to pay a monthly con- sulting fee of $15,000, which was to be paid in January 2015. Frances fulfilled its con- tractual obligation during 2014. d. On July 1, 2014, Frances purchased office equipment for $100,000 cash. The equipment has an estimated useful life of five years and no salvage value. The equipment was imme- diately placed into use. Frances uses the straight-line method of depreciation. It records depreciation expense in proportion to the number of months' usage. eThrough November 30, 2014, the company had paid $66,000 to its employees for 11 months of salaries. Accrued salaries on December 31, 2014, were S6,000. f. On December 31, 2014, Norbert Corporation advanced $20,000 to Frances Corporation for consulting services to be provided during 2015 Required: 1. Provide journal entries for each of these transactions 2. Provide adjusting entries at the end of the ycar 3. Prepare an income statement for the year ended December 31, 2014 4. Prepare a balance sheet as of December 31, 2014 Note 1 The contract on March 1 is a good example of an executory contract. Nothing has happened as of March 1, except an exchange of promises. Everything still remains to be executed. The typical accounting response has been to wait until something happens, say, we do the work. Once we've done the work by December 31, 2014, we would record Accounts Receivable $150,000 Revenue $150,000 Note 2 If you wish to review how accounting works, look at pages 434 to 442. For an example of financial reports, look at Exhibit 2.14 on page 442. That exhibit illustrates a Statement of Financial Position (Balance Sheet) and an Income Statement. The Statement of Financial Position reports the Assets, Liabilities, and Shareholders Equity. The Income Statement reports the Revenues and Expenses, so that it can compute the net as Net Income