Karla Tanner opens a web consulting business called Linkworks and completes the following transactions in its first month of operations. Prepare journal entries for each transaction and identify the financial statement impact of each entry. The financial statements are automatically generated based on the journal entries recorded. April 1 Tanner invested $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock. April 2 The company prepaid $9,000 cash for 12 months' rent for office space. The company's policy is to record prepaid expenses in balance sheet accounts. April 3 The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days. April 6 The company completed services for a client and immediately received $4,000 cash. April 9 The company completed a $6,000 project for a client, who must pay within 30 days. April 13 The company paid $11,600 cash to settle the account payable created on April 3. April 19 The company paid $2,400 cash for the premium on a 12-month prepaid insurance policy. The company's policy is to record prepaid expenses in balance sheet accounts. April 22 The company received $4,400 cash as partial payment for the work completed on April 9. April 25 The company completed work for another client for $2,890 on credit. April 28 The company paid $5,500 cash in dividends. April 29 The company purchased $600 of additional office supplies on credit. April 30 The company paid $435 cash for this month's utility bill. Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact General Journal Tab - For each transaction, prepare the required journal entry on the General Journal tab. List debits before credits. General Ledger Tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab. Trial Balance Tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits. Income Statement Tab - The revenue and expense balances from the trial balance appear on the income statement, along with their balance as of the date selected. Review the income statement and indicate how the income statement is linked to the other financial statements. Statement of Retained Earnings Tab - Beginning retained earnings plus (minus) net income (loss) for the period less dividends. Review the statement of Retained earnings and indicate how the statement is linked to the other financial statements. Balance Sheet Tab - Each asset and liability account balance, as reported on the trial balance, appears on the balance sheet, along with the equity balances. Review the balance sheet and then indicate how the balance sheet is linked to the other financial statements. Financial Statement Impact Tab It is important to be able to identify the impact each transaction has on the financial statements. For each of the transactions, indicate the cumulative amount of net income, total assets, total liabilities and total equity that would appear on the financial statements immediately after each transaction is recorded. > Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact Every journal entry must keep the accounting equation in balance. Prepare the journal entries for each of the transactions of the Linkworks Company, entering the debits before the credits. Each transaction will automatically be posted to the General Ledger and the Trial Balance as soon as you click "Record Entry". Date April 01 Cash View transaction list View journal entry worksheet No 1 Account Title Office equipment Accumulated depreciation office equipment 2 April 02 Prepaid rent Cash 3 April 03 Office equipment Office supplies Accounts payable Debit Credit 80,000 26,000 106,000 9,000 9,000 8,000 3,600 11,600 4 April 06 Cash 4,000 Services revenue 4,000 5 April 09 Accounts receivable 6,000 Services revenue 6,000 6 April 13 Accounts payable Cash 11,600 11,600 7 April 19 Prepaid insurance Cash 2,400 2,400 8 April 22 Cash 4,400 Accounts receivable 4,400 9 April 25 Accounts receivable Services revenue 2,890 2,890 10 April 28 Dividends Cash 11 April 29 Office supplies Cash 12 April 30 Utilities expense Cash 5,500 5,500 < Requirement General Ledger > 600 600 435 435 Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact Each journal entry is posted automatically to the general ledger. Think of the general ledger as sorting all of your journal entries by account title. Click on any of the individual amounts to return to the underlying journal entry. General Ledger Account Cash Accounts receivable No. Date Apr 01 Debit Credit Balance No. Date Debit Credit Balance 0 Apr 01 0 1 April 01 80,000 80,000 5 April 09 6,000 6,000 2 April 02 9,000 71,000 April 22 4,400 1,600 4 April 06 4,000 75,000 9 April 25 2,890 4,490 6 April 13 11,600 63,400 7 April 19 2,400 61,000 8 April 22 4,400 65,400 10 April 28 5,500 59,900 11 April 29 600 59,300 12 April 30 435 58,865 Office supplies Prepaid rent No. Date Debit Credit Balance No. Apr 01 0 Date Apr 01 Debit Credit Balance 0 3 April 03 11 April 29 3,600 600 3,600 2 April 02 9,000 9,000 4,200 444444444 Prepaid insurance Office equipment No. Date Apr 01 Debit 7 April 19 Credit Balance No. Date Debit Credit Balance 0 Apr 01 0 2,400 2,400 1 April 01 26,000 26,000 April 03 8,000 34,000 Accumulated depreciation - office equipment Accounts payable No. Date Debit March 31 1 April 01 Credit Balance No. Date Debit Credit Balance 0 Apr 01 0 106,000 106,000 3 April 03 11,600 11,600 April 13 11,600 0 Credit Balance 0 4,000 4,000 6,000 10,000 2,890 12,890 Dividends Services revenue No. Date Debit Credit Balance No. 10 Apr 01 April 28 0 Date Apr 01 Debit 5,500 5,500 4 April 06 5 April 09 9 April 25 Utilities expense No. Date Debit Credit Balance Apr 01 0 12 April 30 435 435 < General Journal Trial Balance > Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact The trial balance is a listing of all account balances from the General Ledger as of a specific date. Click on any individual account balance to return to the General Ledger. The trial balance is only as accurate as the underlying journal entries. If the total debits do not equal the total credits, you must have a journal entry that is out of balance. If you have an abnormal ending balance (indicated with brackets in the general ledger), you should review the journal entries that affected that account to ensure that the journal entries are correct. Cash 4444 444 444 Show less Dates: April 01 to: April 30 Linkworks Company Trial Balance April 30, 2021 Account Title Accounts receivable Office supplies Prepaid rent Prepaid insurance Office equipment Accumulated depreciation - office equipment Dividends Services revenue Utilities expense Total Debit Credit $ 58,865 4,490 4,200 9,000 2,400 34,000 106,000 5,500 12,890 < General Ledger Income Statement > 435 $ 118,890 $ 118,890 General Requirement Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact An income statement reports the changes in equity attributable to the operation of the business during a specific time period. Revenues increase equity, and expenses decrease equity. Revenues Services revenue Total revenues Expenses Utilities expense Total expenses Net income Linkworks Company Income Statement For Month Ended April 30, 2021 $ 12,890 $ 12,890 435 Net income or loss is transferred from the income statement to the: < Trial Balance 435 $ 12,455 St Retained Earnings > Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact Review the statement of retained earnings and indicate how the statement is linked to the other financial statements. Linkworks Company Statement of Retained Earnings For Month Ended April 30, 2021 Retained earnings, April 1, 2021 Add: Net income Less: Dividends Retained earnings, April 30, 2021 12,455 (5,500) $ 6,955 Ending retained earnings is transferred to the: < Income Statement Balance Sheet > Requirement General Journal General Trial Balance Ledger Income Statement St Retained Earnings Balance Sheet FS Impact The balance sheet is the accounting equation: Assets = Liabilities + Equity. Each asset and liability account is reported separately on the balance sheet. Equity includes common stock and the ending retained earnings amount from the Statement of Retained Earnings. Linkworks Company Balance Sheet April 30, 2021 Assets Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent $ 58,865 4,490 4,200 444 2,400 9,000 Office equipment Total assets 34,000 $ 112,955 Liabilities Accounts payable $ 0 Equity Common stock Retained earnings The balance in retained earnings comes from the: 0 6,955 < St Retained Earnings FS Impact > Requirement General Journal General Ledger Trial Balance Income Statement St Retained Earnings Balance Sheet FS Impact The financial statements report the cumulative impact of all transactions recorded as of the financial statement date. Input the cumulative amount of a) Net Income (Loss), b) Total Assets, c) Total Liabilities, and d) Total Equity that would be reported on the financial statements immediately after each transaction is recorded. (Hint: You can check your work by selecting the date on the trial balance tab.) The first two transactions are completed for you! Transaction: Where can you go to find each of your answers? Net Income Total Assets Total Liabilities Total Equity April 1 Tanner invested $80,000 cash along with office equipment valued at $26,000 in the company $ 0 $ 106,000 $ 0 $ 106,000 in exchange for common stock. April 2 The company prepaid $9,000 cash for 12 months' rent for office space. The company's policy is record prepaid expenses in balance sheet accounts. 0 106,000 0 106,000 April 3 The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days. (3,600) 8,000 11,600 (3,600) April 6 The company completed services for a client and immediately received $4,000 cash. 4,000 4,000 4,000 April 9 The company completed a $6,000 project for a client, who must pay within 30 days. 6,000 6,000 6,000 April 13 The company paid $11,600 cash to settle the account payable created on April 3. 11,600 11,600 April 19 The company paid $2,400 cash for the premium on a 12-month prepaid insurance policy. The company's policy is to record prepaid expenses in balance sheet accounts. 0 April 22 The company received $4,400 cash as partial payment for the work completed on April 9. 0 April 25 The company completed work for another client for $2,890 on credit. 2,890 2,890 2,890 April 28 The company paid $5,500 cash in dividends. (5,500) (5,500) April 29 The company purchased $600 of additional office supplies on credit. (600) 600 (600) April 30 The company paid $435 cash for this month's utility bill. (435) (435) (435) < Balance Sheet FS Impact > Show less