QRS Corp had the following transactions during April 2024:

Date	Transaction
April 2	Purchased inventory on account for $40,000.
April 6	Sold goods costing $20,000 for $30,000 on account.
April 10	Paid $2,000 for utilities.
April 15	Collected $16,000 from customers on account.
April 20	Paid suppliers $18,000.
April 25	Declared and paid dividends of $3,500.

Requirements:

1. Journalize the transactions.
2. Post the journal entries to the general ledger.
3. Prepare a trial balance as of April 30, 2024.
4. Prepare an income statement for April 2024.
5. Explain the effects of utility expenses on the overall operating expenses of the company.

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PQR Company has the following account balances on December 31, 2023:

• Cash: $18,000
• Accounts Receivable: $12,000
• Inventory: $22,000
• Accounts Payable: $8,000
• Salaries Payable: $3,000
• Equipment: $35,000
• Accumulated Depreciation: $10,000
• Notes Payable: $15,000
• Common Stock: $20,000
• Retained Earnings: $31,000

Requirements:

1. Prepare a trial balance.
2. Prepare adjusting entries for the following:
   • Depreciation expense: $2,500
   • Salaries expense: $3,500
3. Prepare an adjusted trial balance.
4. Prepare a balance sheet.
5. Discuss the importance of preparing financial statements in accordance with GAAP.

Solution:

Trial Balance:

Account	Debit	Credit
Cash	$18,000
Accounts Receivable	$12,000
Inventory	$22,000
Equipment	$35,000
Accumulated Depreciation		$10,000
Accounts Payable		$8,000
Salaries Payable		$3,000
Notes Payable		$15,000
Common Stock		$20,000
Retained Earnings		$31,000
	--------	--------
Total	$87,000	$87,000

Adjusting Entries:

1. Depreciation Expense:
   • Debit: Depreciation Expense $2,500
   • Credit: Accumulated Depreciation $2,500
2. Salaries Expense:
   • Debit: Salaries Expense $3,500
   • Credit: Salaries Payable $3,500

Adjusted Trial Balance:

Account	Debit	Credit
Cash	$18,000
Accounts Receivable	$12,000
Inventory	$22,000
Equipment	$35,000
Accumulated Depreciation		$12,500
Accounts Payable		$8,000
Salaries Payable		$6,500
Notes Payable		$15,000
Common Stock		$20,000
Retained Earnings		$31,000
Depreciation Expense	$2,500
Salaries Expense	$3,500
	--------	--------
Total	$93,000	$93,000

Balance Sheet:

Assets:

• Cash: $18,000
• Accounts Receivable: $12,000
• Inventory: $22,000
• Equipment: $35,000
• Accumulated Depreciation: ($12,500)
• Total Assets: $74,500

Liabilities:

• Accounts Payable: $8,000
• Salaries Payable: $6,500
• Notes Payable: $15,000
• Total Liabilities: $29,500

Equity:

• Common Stock: $20,000
• Retained Earnings: $25,000
• Total Equity: $45,000

Total Liabilities and Equity: $74,500

Discussion:

Preparing financial statements in accordance with GAAP ensures consistency, reliability, and comparability of financial information. It helps stakeholders make informed decisions and enhances the credibility of the company’s financial reporting.