The T balance sheet is given below.
Questions:
- Create the journal entries and adjusting journal entries to reflect the above events. If no entry is required, document this and explain why.
- Create T-accounts, post the opening balances from the July 31 trial balance, post all of the transactions to the appropriate T-account, making new T-accounts if needed. Be sure to calculate the total for each T-account. (You can use the template below.)
- Prepare the adjusted trial balance, showing the opening trial balance, a net adjustment column and the closing balances. (You can use the template below.)
- The equipment was purchased using a loan of $280,000. Loan payments are made on the last day of each month in the amount of $4,200, there is no interest charged on this loan. There are two years of payments left outstanding on the loan as of July 31, 2023. - No depreciation or amortization expense has been recorded on the equipment for the 2023 year end as it is usually recorded on the last day of the year. -The insurance policy runs from January 1, 2023 to December 31, 2023. The premium paid for the current year was $7,200 and was put into prepaid insurance. -You have determined unearned revenue consists of two different amounts from July: -First, advertising sales of $23,600 that was paid by various customers, but related to the magazine released on July 1, 2023 -Second, $32,400 of payments from Saskatoon 6F Club for promotional merchandise that were not completed or delivered as of June 30, 2023 They are tracking advertising and merchandising revenues separately. Events/Transactions Date Details July 1 The July 1 st magazine is printed and distributed and released online. July 3 A customer calls in and places and order for $41,800 of promotional products July 6 Additional supplies (inventory) are ordered on account for the month, total ordered $83,540. No invoice is received and they estimate at least week until the goods ship. July 11 Saskatoon 6F Club order (paid for previously) is completed and delivered at the agreed upon rate of $32,400 for all the merchandise. July 16 Invoice of $83,540 and shipping notification is received for the supplies ordered on July 6 th. July 17 A custom merchandise job order is received and a payment is made on the order in the amount of $25,000. The custom order is not expected to be completed until August 16, 2023 July 22 The order placed on July 3 for $41,800 is completed, invoiced, and shipped to the customer \begin{tabular}{|c|c|c|c|c|c|c|} \hline & \multicolumn{2}{|c|}{ Unadjusted } & \multicolumn{2}{|c|}{ Adjustments } & \multicolumn{2}{|c|}{ Adjusted } \\ \hline & DR & CR & DR & CR & DR & CR \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline Total & & & & & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline Cash & A/R & Interest Receivable & Supplies (Inventory) \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline Prepaid Rent & Prepaid Insurance & & Equipment \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline A/A Equipment & Investments & & Accounts Payable \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline Unearned Revenue & Salaries Payable & & Loan Payable - Equip \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline & & & \\ \hline \end{tabular} Reading Booster Ltd. Unadjusted Trial Balance As of June 30, 2023 \begin{tabular}{|c|c|c|c|c|} \hline & & DR & & CR \\ \hline Cash & $ & 195,300 & & \\ \hline Accounts Receivable & $ & 83,600 & & \\ \hline Supplies (Inventory) & $ & 72,150 & & \\ \hline Prepaid Rent & $ & - & & \\ \hline Prepaid Insurance & $ & 7,200 & & \\ \hline Equipment & $ & 445,000 & & \\ \hline A/A - Equipment & & & $ & 125,000 \\ \hline Investments & $ & 195,000 & & \\ \hline Accounts Payable & & & $ & 6,850 \\ \hline Unearned Revenue & & & $ & 56,000 \\ \hline Loan Payable - Equipment & & & $ & 105,000 \\ \hline Share Capital & & & $ & 500 \\ \hline Retained Earnings & & & $ & 491,180 \\ \hline Advertising Sales & & & $ & 324,300 \\ \hline Merchandise Sales & & & $ & 381,650 \\ \hline Cost of Goods Sold & $ & 142,190 & & \\ \hline Amortization & $ & - & & \\ \hline Insurance Expense & $ & - & & \\ \hline Office Expense & $ & 21,190 & & \\ \hline Rent Expense & $ & 60,000 & & \\ \hline Salary Expense & $ & 236,200 & & \\ \hline Utility Expense & $ & 32,650 & & \\ \hline Total & $ & 1,490,480 & $ & 1,490,480 \\ \hline \end{tabular} You have just been hired as the accountant for "Reading Booster Ltd.", a company that issues a monthly magazine. They have two main sources of income - advertising (print and online) and the sale of promotional merchandise for individuals and companies. The magazine is released on the first day of each month. The company has been operating for many years and the prior accountant retired. You are now responsible in picking up where they left off. The prior accountant prepared the unadjusted trial balance for you to start with - see the next tab below. The owner and prior accountant also provided you with the following additional information to help you with any unrecorded transactions. Other Details: - The year-end date is July 31, 2023 - The prior accountant has recorded all transactions from August 1, 2022 to June 30, 2023. They have provided the trial balance of all the work they did up to June 30, 2023. - You have been able to confirm there are no errors in the numbers provided, but there appear to be some classification differences and adjustments needed for the year end. - A/A is short for accumulated amortization - Supplies consist of various products purchased that they then use their equipment to engrave, as well as supplies for printing the magazine and creating other products for re-sale (supplies are assets to be consumed) - Accounting policy is to add supplies purchased to the asset (inventory) account and adjust at month end. - Each year any profits are moved into investments that can be withdrawn at any time as needed. - The rental agreement for the location was renewed, signed and paid on August 1, 2022. They received a substantial reduction in rent by paying for two years of rent at once, total payment was $60,000. The two year rental agreement runs from August 1, 2022 to July 31, 2024 - The equipment was purchased 4 years ago and is expected to last for another 16 years, including the current year. The current net book value of the equipment after 4 years of depreciation has been claimed is $320,000
