Question 1

Oscar Teng started a part-time web design business from home about a year ago. As of 31 December 2022, the business has the following accounts. All the accounts have normal balances.

$ Cash 5,860 Supplies 6,400 Prepaid insurance 1,800 Accounts receivable 8,700 Equipment 9,000 Accounts payable 1,330 Capital 15,000 Service revenue 48,900 Salaries expense 32,400 Telephone expense 1,070

 Additional information 

 

(i) $1,200 of the prepaid insurance shown above has expired as of 31 December. (ii) Supplies on hand at 31 December were $800. (iii) Salaries incurred but not paid at 31 December were $500. (iv) Annual depreciation of the equipment of $1,700 has not been provided. (v) The business received a telephone bill for December 2022 for $120. This amount was still outstanding on 31 December. (vi) Oscar Teng estimated that a customer who owed $500 on 31 December may not be collectible. The business uses the allowance method to account for bad debt. (vii) It was also established that included in the service revenue account, $3,400 was unearned. 

 

Question 1a Present a trial balance for this business as at 31 December 2022 before journalizing the adjusting entries.

Question 1b Examine the additional information provided and preparing all the necessary adjusting entries. No narrations required.

 Question 1c Present the following after taking into consideration all the adjustments in (b): (i) The net profit for the year ending 31 December 2022. (ii) The total assets as at 31 December 2022. (iii) The total liabilities as at 31 December 2022.