Question 3

(50 marks)

Bobs Best Ads, a proprietorship created by Bob Best, did consulting work relating to commercials for television and ads for newspapers. Bobs Best Ads prepared the following financial statement:

Bobs Best Ads
Unadjusted Trial Balance
December 01, 2018
ACCOUNT	DEBIT	CREDIT
Cash	$ 32,000
Accounts Receivable	30,000
Supplies	4,000
Prepaid Advertising	20,000
Computer Equipment	60,000
Accumulated Amortization, Computer Equipment		$ 0
Furniture	100,000
Accumulated Amortization, Furniture		0
Accounts Payable		40,000
Salaries Payable		8,000
Unearned Revenue		15,000
Bob Best, Capital		130,000
Bob Best, Withdrawals	50,000
Consulting Revenue		286,000
Advertising Expense	70,000
Entertainment Expense	23,000
Salaries Expense	90,000
Total	$ 479,000	$ 479,000

In December 2018, the following transactions occurred:

1. December 01: Bobs Best Ads paid $ 50,000 cash for a television ad, which promotes the great work that Bobs Best Ads can do for its clients. It will air on television in February 01, 2019.
2. December 05: Bob Best withdrew $ 20,000 cash from his personal bank account, to purchase a watch for his dads birthday.
3. December 10: Bobs Best Ads purchased $ 3,000 supplies on account.
4. December 12: A client gave Bobs Best Ads a cheque for $ 25,000 for work to be done in March 2019.
5. December 15: Bobs Best Ads provided $ 13,000 consulting services for a client; the client will pay Bobs Best Ads in March 2019.
6. December 31: Bob Best did a physical count of office supplies, and he determined that $ 5,000 was on hand.
7. The computer equipment, purchased on January 02, 2018, was expected to last 5 years. The computer equipment had no residual value after 5 years. Bobs Best Ads used the straight-line method of amortization.
8. The furniture, purchased on January 02, 2018, was expected to last 10 years; it had no expected value after 10 years. Bobs Best Ads used the straight-line method of amortization.
1. Bob Best received a year-end bonus of $ 9,000, which will be paid in March 2019.

Required:

1. Journalize the above transactions affecting Bobs Best Ads. Provide a written explanation for each journal entry recorded or not recorded.
2. Prepare a December 31, 2018 adjusted trial balance for Bobs Best Ads. Record the expenses in alphabetical order.
3. Prepare a December 31, 2018 income statement for Bobs Best Ads.
4. Prepare a December 31, 2018 statement of owners equity for Bobs Best Ads. Assume that there have been no changes to the capital account since January 01, 2018.
5. Prepare a December 31, 2018 balance sheet for Bobs Best Ads.