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CUMULATIVE COMPREHENSION PROBLEM: ECHO SYSTEMS

$($This comprehensive problem starts in this chapter and continues in Chapters $3,4,$ and $5.$ Because of its length, this problem is most easily solved if you use the Working Papers ${?}^{14}$ that accompany this text.$)$

On October $1,2020,$ Mary Graham organized a computer service company called Echo Systems. Echo is organized as a sole proprietorship and will provide consulting services, computer system installations, and custom program development. Graham has adopted the calendar year for reporting, and expects to prepare the company's first set of financial statements as of December $31,2020.$ The initial chart of accounts for the accounting system includes these items:

$\backslash$table$[[$Account Number,Account Name,Account Number,Account Name$],[101,$Cash,$301,$Mary Graham, Capital$],[106,$Accounts Receivable,$302,$Mary Graham, Withdrawals$],[126,$Computer Supplies,$403,$Computer Services Revenue$],[128,$Prepaid Insurance,$623,$Wages Expense$],[131,$Prepaid Rent,$655,$Advertising Expense$],[163,$Office Equipment,$676,$Mileage Expense$],[167,$Computer Equipment,$684,$Repairs Expense, Computer$],[201,$Accounts Payable,$699,$Charitable Donations Expense$],[,,,],[,,,]]$

Part A:

CHECK FIGURES: $4.$ Total Dr$.=$$$159,450$; Profit $=$$$8,920$; Total assets $=$$$145,720$

Required

Set up balance column accounts based on the chart of accounts provided.

Prepare journal entries to record each of the following October transactions.

Post the October entries.

Prepare a trial balance at October $31,2020.$

Prepare an income statement and a statement of changes in equity for the month ended October $31,2020.$ as well as a balance sheet at October $31,2020.$Oct. $1$ Graham invested $$90,000$ cash, a $$36,000$ computer system, and $$18,000$ of office equipment in the business.

$2$ Paid rent in advance of $$9,000.$

$3$ Purchased computer supplies on credit for $$2,640$ from Abbott Office Products.

$5$ Paid $$4,320$ cash for one year's premlum on a property and liability insurance policy.

$6$ Billed Capital Leasing $$6,600$ for installing a new computer.

$8$ Paid for the computer supplies purchased from Abbott Office Products.

$10$ Hired Carly Smith as a part$-$time assistant for $$200$ per day, as needed.

$12$ Billed Capital Leasing another $$2,400$ for computer services rendered.

$15$ Received $$6,600$ from Capital Leasing on its account.

$17$ Paid $$1,410$ to repair computer equipment damaged when moving into the new office.

$20$ Paid $$3,720$ for an advertisement in the local newspaper.

$22$ Received $$2,400$ from Capital Leasing on its account.

$28$ Billed Decker Company $$6,450$ for services.

$31$ Paid Carly Smith for seven days' work.

$31$ Withdrew $$7,200$ cash from the business for personal use.

Part B:

CHECK FIGURES: $8.$ Total Dr$.=$$$184,950$;$9.$ Profit $=$$$27,920$; Total assets $=$$$161,120$

Required

$6.$ Prepare journal entries to record each of the following November transactions.

$7.$ Post the November entries.

$8.$ Prepare a trial balance at November $30,2020.$

$9.$ Prepare an income statement and a statement of changes in equity for the two months ended November $30,2020,$ as well as a balance sheet at November $30,2020.$

Nov. $1$ Reimbursed Graham's business automobile expense for $1,000$ kilometres at $$1\mathrm{.}00$ per kilometre.

$2$ Received $$9,300$ cash from Elite Corporation for computer services rendered.

$5$ Purchased $$1,920$ of computer supplies for cash from Abbott Office Products.

$8$ Billed Fostek Co$.$ $$8,700$ for computer services rendered.

$13$ Notified by Alamo Engineering Co$.$ that Echo's bid of $$7,500$ for an upcoming project was accepted.

$18$ Received $$3,750$ from Decker Company against the bill dated October $28.$

$22$ Donated $$1,500$ to the United Way in the company's name.

$24$ Completed work for Alamo Engineering Co$.$ and sent a bill for $$7,500.$

$25$ Sent another bill to Decker Company for the past due amount of $$2,700.$

$28$ Reimbursed Graham's business automobile expense for $1,200$ kilometres at $$1\mathrm{.}00$ per kilometre.

$30$ Paid Carly Smith for $14$ days' work.

$30$ Withdrew $$3,600$ cash from the business