Situation Analysis

Michael Ayers began a financial services consulting business, Ayers Consulting, on April 1, 20Y4. The chart of accounts and financial statements for April follow:

During May, Ayers Consulting entered into the following transactions:

May 3 Received cash from clients as an advance payment for services to be provided and recorded it as Unearned Fees, $4,200.

May 5 Received cash from clients on account, $2,100.

May 9 Paid cash for a newspaper advertisement, $250.

May 13 Paid Office Store for part of the debt incurred on April 5, $500.

May 15 Provided services on account for the period May 1-15, $9,250.

May 16 Paid part-time secretary for two weeks salary including the amount owed on April 30, $700.

May 17 Received cash from cash clients for the fees earned during the period May 1-16, $8,500.

Record the following transactions on Page 6 of the journal:

May 20 Purchased supplies on account, $570.

May 21 Provided services on account for the period May 16-20, $3,950.

May 25 Received cash from cash clients for cash earned for the period May 17-23, $1,100.

May 27 Received cash from clients on account, $8,700.

May 28 Paid part-time secretary for two weeks salary, $700.

May 30 Paid telephone bill for May, $310.

May 31 Paid electricity bill for May, $820.

May 31 Received cash from cash clients for cash earned for the period May 26-31, $1,940.

May 31 Provided services on account for the remainder of May, $3,100.

May 31 Ayers withdrew $9,000 for personal use.

INSTRUCTIONS

1. Using the chart of accounts and financial statements provided, create a four-column account. List the beginning balance and place a check mark in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting on Page 5 of the journal and using Ayers chart of accounts.
2. Post the journal entries to the four-column ledger.
3. Prepare an unadjusted trial balance.

At the end of May, the following adjustment data were gathered. Analyze and use these data for step 4.

1. Insurance expired during May is $200.
2. Supplies on hand on May 31 are $310.
3. Depreciation of office equipment for May is $380.
4. Accrued receptionist salary on May 31 is $210.
5. Rent expired during May is $850.
6. Unearned fees on May 31 are $3,440

1. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal.
2. Prepare an adjusted trial balance.
3. Prepare an income statement, a statement of owners equity, and a balance sheet.
4. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry.
5. Prepare a post-closing trial balance.

Transcribed Image Text:

11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Rent 16 Prepaid Insurance 18 Office Equipment 19 Accumulated Depreciatio 21 Accounts Payable 22 Salaries Payable 23 Unearned Fees 31 Michael Ayers, Capital 32 Michael Ayers, Drawing 41 Fees Earned 51 Salary Expense 52 Rent Expense 53 Supplies Expense 54 Depreciation Expense 55 Insurance Expense 59 Miscellaneous Expense 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Rent 16 Prepaid Insurance 18 Office Equipment 19 Accumulated Depreciatio 21 Accounts Payable 22 Salaries Payable 23 Unearned Fees 31 Michael Ayers, Capital 32 Michael Ayers, Drawing 41 Fees Earned 51 Salary Expense 52 Rent Expense 53 Supplies Expense 54 Depreciation Expense 55 Insurance Expense 59 Miscellaneous Expense