Scenario: One year ago, Allan Thorpe founded Alcazar Sales Company, and the business has prospered. Allan comes to you for advice. He wishes to know how much net income the business earned during the past year. The accounting records consist of the T-accounts in the ledger, which were prepared by an accountant who has resigned from the company. The accounts at December 31 are as follows:

Apply Your Knowledge

Allan indicates that, at year-end, customers owe him $1,000 accrued service revenue, which he expects to collect early next year. These revenues have not been recorded. During the year, he collected $4,100 service revenue in advance from customers, but the business has earned only $800 of that amount. During the year he has incurred $2,400 of advertising expense, but he has not yet paid for it. In addition, he has used up $2,100 of the supplies. Allan determines that depreciation on equipment was $7,000 for the year. At December 31, he owes his employee $1,200 accrued salary. The rent paid in advance on Jan 2 for $2,800 relates to the period January 2019 through to February 2020. The owner made no capital investments during the year.

Allan expresses concern that drawing during the year might have exceeded the businesss net income. To get a loan to expand the business, Allan must show the bank that the businesss owners equity has grown from its original $40,000 balance. You and Allan agree that you will meet again in one week.

Requirement:

1. Prepare the journal entries for the transactions that were not previously recorded, prepare and update the T-accounts and determine the ending balance on all accounts used by the company.

2. Prepare the adjusted trial balance for the company.

3. Prepare the 2019 companys financial statements for presentation to the bank and to help address the first issue concerning Allan.

4. Has the owners equity grown from its original $40,000 balance? Can Mr. Thorpe expect to get the loan? Give your reason(s).

Word File Edit View Insert Format Font Tools > * 99% GO Tue 9:47 AM QUE Table Window > Help ACCT1002 Assignment 1.doc [Compatibility Mode] ? 18 125% Q- Search in Document and A' Charts SmartArt Review Normal Calibri 11 BI U A Home Layout Document Elements Tables Font Calibri 11 A A- A A BI U UABE ABE APA A ABC- Table Layout Paragraph Styles Insert Themes AaBbqcDdEe AaBbCD AaBb CcDe AaBbCcDdE AaBb ! Normal Note Level 2 Heading 1 Heading 2 Title Text Box Shape Picture Themes 21. ...30 #T#.4.1 5 ::.6. I.71 Cash 5,800 Accounts receivable 12,300 Dec 31 Bal Dec 31 Bal Prepaid rent 2,800 Supplies 2,600 2-Jan 2-Jan Accumulated depreciation-equipment Equipment 52,000 2-Jan Salary payable Accounts payable Dec 31 Bal 18,500 Unearned service revenue Dec 31 Bal Allan Thorpe, capital 2-Jan 4,100 40,000 | Allan Thorpe, drawing 50,000 Service revenue Dec 31 Bal Dec 31 Bal 80,700 = E Print Layout View Sec 1 Pages: : 2 of 6 Words: 352 of 992 125% GAME > Word File Edit View Insert Insert Format Font Tools > * 99% Tue 9:47 AM QE Table Window 3 Help ACCT1002 Assignment 1.doc [Compatibility Mode] 18 125% ? Q- Search in Document Normal and A' A Home Charts SmartArt Review Calibri 11 BI U Layout Document Elements Tables Font 11 Ab A- A Aa Table Layout Paragraph Styles Insert Themes Calibri AaBbCcDdEe AaBbCD AaBb CcDe AaBbCcDdE AaBb ! B I U UABE ABE APA2 A ABC 1 Normal Note Level 2 Heading 1 Heading 2 Title Text Box Shape Picture Themes IIIIIIIII 1...2...31 #L4LI 5 ::.6. I.71 ouviu Salary expense 17,000 Depreciation expense Dec 31 Bal Advertising expense Utilities expense 800 Dec 31 Bal Supplies expense Rent expense 11 E Print Layout View Sec 1 Pages: : 2 of 6 Words: 352 of 992 125% COM W