Question
Part I - Booking Transactions using Journal Entries The Topanga Company provides legal services to its customers. At the beginning of 2016, the company had
Part I - Booking Transactions using Journal Entries
The Topanga Company provides legal services to its customers. At the beginning of 2016, the company had the following balances in its financial accounting records:
DEBIT CREDIT
Cash $16,200
Accounts Receivable $1,800
Building $4,800
Accumulated Depreciation - Building $2,800
Notes Payable $2,000
Common Stock $15,000
Retained Earnings $3,000
- Notes Payable represents money that won't need to be paid back for a long time. The company pays interest (in cash) every December 31 at a rate of 9%.
- Building was purchased 28 years ago and is expected to last another 20 years (a total of 48 years)
For each of the transactions below, write journal entries in a manner that makes it CLEAR which accounts are debited and which are credited. Failure to do this will be rewarded with NO credit.
Transaction 1: On April 1, the company pays 3 years of rent in advance with $7,200 cash.
Transaction 2: On April 11, the company buys $20,000 of Inventory and the supplier trusts them to eventually pay (credit Accounts Payable).
Transaction 3: On May 1, the company finds someone willing to buy $4,000 of Inventory for $14,000. The company delivers it immediately. The customer puts down $8,000 in Cash immediately AND is known to have excellent credit scores.
Transaction 4: On August 26, the company gets a Utilities bill for $3,000 and pays it immediately.
Transaction 5: On December 15, the company pays $2,000 (Cash) for some the Inventory it bought on April 11.
Transaction 6: On December 15, the company pays out a $1,000 cash dividend to its owners.
Part II - Booking Adjustments
Now, it is December 31, 2016. For each of the transactions below, write journal entries in a manner that makes it CLEAR which accounts are debited and which are credited. Failure to do this will be rewarded with NO credit.
- 9 months of the rent purchased on April 1 has been "used up"
- Deal with Annual Depreciation
- Deal with Annual Interest on the Note Payable
Part III - Preparing Financial Statements
1. Prepare a well-formatted Income Statement for The Topanga Company for the year ended December 31, 2016.
The Topanga Company
Income Statement
For the Year Ended December 31, 2016
2. Prepare a well-formatted Balance Sheet for The Topanga Company as of December 31, 2016.
The Topanga Company
Balance Sheet
As of December 31, 2016
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