Operational cycle

PROBLEM: Skinny Enterprise has operated a business for the past two years from his home. In January 2020, she decided to move to a lease office space. Skinny registered the business as a corporation according to Delaware laws in January 2020. Skinny Enterprise Corporation received authorization to issue 1,500,000 common shares with $1.4 par value. During January 2020, the business entered the following transactions: 2 The following assets received from Skinny Enterprise in exchange for 175,000 common shares: Cash, $156,000; Accounts Receivable, $75,000; Office Supplies, $8,280; Prepaid Insurance $36,000 (for 24 month) and Building, $208,000. There were no liabilities assumed. 2 Borrowed $125,000 from Banco Popular with 8% of interest. 3 Paid THREE year of rent on a lease rental contract, $36,000 1 yecorded as Prepaid) 3 Purchased office equipment on account for $28,000. 4 Purchase a Building with a market value of $160,000 in exchange of 47,890 company shares. 4 Paid the premiums on property and casualty insurance policies, $9,000 for 18 MONTHS (recorded as Prepaid) 5 Received cash from clients as an advance payment for services to provided and recorded it as unearned fees, $34,000. 6 Invests cash not needed for operations in trading shares at 5%, $180,000. 7 Received cash from clients on account, $43,000. 10 Paid cash for a newspaper advertisement for TWO years, $2,400 (recorded as Prepaid) 11 Paid part of debt incurred on January 3, $7,000. 12 Recorded services provided on account for the period January 1-15, $48,000. 13 Recorded cash from cash clients for fees earned during January 1-15, $55,000. 15 Skinny declared cash dividends of $.30 for outstanding shares to be paid on January 31. 17 Paid telephone, cable, and internet bills for January, $1,825. 18 Issue 18,000 new shares for a market value of $2.00. 19 Paid cash for supplies, $5,700. 21 Received cash from clients on account, $38,000. 22 Received $1,575 from a leased space. 25 Pald electricity bill for January, $1,340. 26 Obtain the investor list for dividend payment on January 31 27 Pald part of debt incurred on January 3, $7,000. 30 Paid monthly office salary, $16,000; sales salaries for $24,000; and $8,000 to Skinny as General Manager of Skinny Enterprise Corporation. Deductions for FICA 6.2% and Medicare Tax 1.45%, federal income tax withheld 20%. Voluntary deductions are: United Funds $200 and Red Cross $500. 30 Recorded employer payroll taxes expense for FICA 6.2% and Medicare Tax 1.45%, 5.4% for state unemployment (SUTA tax) and .8% for federal unemployment (FUTA tax). 29 Recorded cash from cash clients for fees earned during Jancary 16-30, $54,880 30 Recorded services provided on account for the remainder of January 16-30, $46,000. 31 Skinny paid cash dividends declared on January 15. - . . . . Instructions: 1. Prepare a General Ledger using the accounts titles and numbers provided below. 2. Journalize each transaction in a Journal (see the model in Illustration 2.7 on page 58). Refer to the following chart of accounts: 1105 Cash 1106 Trading Securities Shares 1115 Accounts Receivable 1135 Office Supplies 1148 Prepaid Advertising 1149 Prepaid Rent 1150 Prepaid Insurance 1500 Office Equipment 1510 Accumulated Depreciation - Office Equip 1580 Building 1585 Accumulated Depreciation -- Building 2105 Accounts Payable 2106 Interest Payable 2107 Unearned Fees 2110 Administrative Salaries Payable 2111 Office Salaries Payable 2112 Sales Office Salaries Payable 2115 Federal Income Tax Payable 2125FICA SS Tax Payable 2126 FICA Medicare Tax Payable 2127 United Funds Payable 2128 Red Cross Payable 2135 FUTA Tax Payable 2140 SUTA Tax Payable 2145 Dividends Payable 2500 Note Payable 2510 Bonds Payable 3110 Capital Stock -- Common 3111 Additional Paid in Capital - Common 3115 Retained Earnings 3125 Cash Dividends . . . . - . . . - . B a 3 4106 Fees Earned 4107 Rent Revenue 6105 Advertising Expense 6110 Depreciation Expense -- Building 6120 Depreciation Expense - Office Equipment 6150 Insurance Expense 6155 Salary Expense -- Admin 6160 Salary Expense -- Office 6165 Salary Expense -- Sales 6170 Supplies Expense 6200 Employer Payroll Taxes Expense 6210 Rent Expense 6215 Utilities Expense 8105 Interest Expense 8106 Unrealized Holding Gain or Loss Trading . . . 3. Post the journal entries to a ledger accounts, you may use four column formats for each one of the ledger accounts. 4. Prepare an unadjusted trial balance on January 31, 2020. At the end of January, the following adjustments data were obtained. Analyze and use these data to complete #5 y #6 instructions. HAND OUT YOUR CALCULATIONS a. Insurance expired during January for each policy. b. Supplies on hand on January 31 are $4,375. C. Depreciation of office equipment for January 31, use the straight-line method (Residual value $5,000, and useful life 60 months) d. Depreciation of building for January 31, use the straight-line method (Residual value $18,000, and useful life 120 months) e. Rent expired during January f. Unearned fees earned during January 31 are $15,000. 8. Market value in Investment in trading securities increase to $189,500. h. Advertising expired during January. i. Record one month of interest accrued on note payable. J. Record one month of interest accrued on trading securities, 5. Prepare adjusting entries. 6. Journalize and post adjusting entries to the ledger accounts. 7. Prepare an adjusted trial balance. 8. Prepare on January 31, 2020 a Multiple Step Income Statement, a Retained Earnings Statement, Statement of Shareholder's, and a Statement of Financial Position (Balance Sheet). 9. Journalize and post to the ledger accounts the closing entries. 10. Prepare a Post-Closing Trial Balance on January 31, 2020