FUNDAMENTALS OF ACCOUNTING

PRACTICE PROBLEM

Jenny Light completed these transactions during December:

Dec. 2 Invested P120,000 to start an accounting practice , Jenny Light, Accountant.

2 Paid monthly office rent, P5,000.

3 Paid cash for an Acer computer, P30,000. The computer is expected to remain in service for 5 years.

4 Purchased office furniture on account, P36,000. The furniture should last for 5 years.

5 Purchased supplies on account, P3,000.

9 Performed tax services for a client and received cash for the full amount of P8,000.

12 Paid utility expenses, P2,000.

18 Performed consulting service for a client on account, P17,000.

21 Received P9,000 in advance for tax work to be performed evenly over the next 30 days.

21 Hired a secretary to be paid P15,000 on the 20 th day of each month.

26 Paid for the supplies purchased on December 5.

28 Collected P6,000 from the consulting client on December 18.

30 Withdrew P16,000 for personal use.

Here are the account titles used by Jenny Light, Accountant.

Cash
Accounts Receivable
Supplies
Equipment
Furniture
Accounts Payable
Jenny Light, Capital
Jenny Light, Drawing
Service Revenue
 Supplies
Equipment
Furniture
Accounts Payable
Jenny Light, Capital
Jenny Light, Drawing
Service Revenue

Requirements:

1. Journalize the transactions. Explanations are not required. Use 2 Column Journal.

2. Post to the T-Accounts (General Ledger), keying all items by date. Indicate account balance.

3. Prepare the worksheet.

4. At December 31, Jenny Light gathers the following information for the adjusting entries:

a) Accrued service income, P4000.

b) Earned a portion of the service revenue collected in advance on December 21.

c) Supplies on hand, P1,000.

d) Depreciation expense for Equipment.

e) Depreciation expense for Furniture.

f) Accrued expenses for secretary’s salary is P5,000.

Prepare the adjusting entries on your 2 column journal and post to the worksheet.

5. Complete the worksheet.

6. Prepare the: A) Income Statement and B) Balance Sheet

Journal Entries Account Titles and Description Debit

02-Dec Cash 120,000.00

Jenny Light, Capital
invested cash in the business

2 Rent Expense 5,000.00

Cash
Paid rent for the month.

3 Equipment 30,000.00
Cash
Purchase a computer.

4 Furniture 36,000.00
Accounts Payable
Bought furnitures on account.

5 Supplies 3,000.00
Accounts Payable
Purchase supplies on account.

9 Cash 8,000.00
Service Revenue
Cash received from services rendered.

12 Utilities Expense 2,000.00

Cash
Paid utilities for the month.

18 Accounts Receivable 17,000.00

Service Revenue

21 Cash 9,000.00
Unearned Service Revenue

21 No entry

26 Accounts Payable 3,000.00

Cash

28 Cash 6,000.00
Accounts Receivable

30 Jenny Light Drawings 16,000.00

 Cash

Adjusting Entries

a. Accrued Service Income/ Accounts Receivable 4,000.00

Service Revenue

b. Unearned Service Revenue 3,000.00

Service Revenue
9000/30days x 10 days (dec 21 to 31)

C. Supplies Expense 2,000.00

Supplies
3000-1000=2000

d. Depreciation Exp- Equipt. 500.00

Accum. Depreciation - Equipt.

30000/60 x1

e Depreciation Exp- Furniture 600.00

Accum. Depreciation - Furniture
36000/60 x 1

f Salary Expense 5,000.00

Salary payable
Credit

120,000.00

5,000.00

30,000.00

36,000.00

3,000.00

8,000.00

2,000.00

17,000.00

9,000.00

3,000.00

6,000.00
16,000.00

4,000.00

3,000.00

2,000.00

500.00

600.00

5,000.00
 General Ledger
Cash Accounts Receivable Supplies Equipment Furniture
Dec-20 120,000.00 5,000.00 Dec 2 Dec 18 17,000.00 6,000.00 Dec 28 Dec 5 3,000.00 Dec 3 30,000.00 Dec 4 36,000.00
Dec-09 8,000.00 30,000.00 Dec 3
Dec-21 9,000.00 2,000.00 Dec 12
Dec-28 6,000.00 3,000.00 Dec 26
16,000.00 Dec 30
143,000.00 56,000.00 17,000.00 6,000.00 3,000.00 30,000.00 36,000.00

87,000.00 11,000.00

Accounts Payable Jenny Light, Capital Jenny Light, Drawing Service Revenue Rent Expense
Dec-26 3,000.00 36,000.00 Dec 4 120,000.00 Dec 20 Dec 30 16,000.00 8,000.00 Dec 9 Dec 2 5,000.00
3,000.00 Dec 5 17,000.00 Dec 18

25,000.00
3,000.00 39,000.00 120,000.00 16,000.00 5,000.00

36,000.00

Utilities Expense Salary Expense Accumulated Depreciation- Equipment Accumulated Depreciation- Furniture Salary Payable
Dec-12 2,000.00

2,000.00

Unearned Service Revenue Depreciation Expense- Equipment Depreciation Expense- Furniture Supplies Expense
9,000.00 Dec 21

9,000.00
 Cash Accounts Receivable Supplies Equipment Furniture
120,000.00 5,000.00 17,000.00 6,000.00 3,000.00 30,000.00 36,000.00
8,000.00 30,000.00
9,000.00 2,000.00
6,000.00 3,000.00
16,000.00
143,000.00 56,000.00 - 17,000.00 6,000.00 - 3,000.00 - - 30,000.00 - - 36,000.00 -
2,000.00
87,000.00 11,000.00
` 4,000.00 1,000.00

15,000.00

Accounts Payable Jenny Light, Capital Jenny Light, Drawing Service Revenue Rent Expense
36,000.00 120,000.00 16,000.00 8,000.00 5,000.00
3,000.00 3,000.00 17,000.00

3,000.00 39,000.00 - - 120,000.00 - 16,000.00 - - - 25,000.00 - 5,000.00 -

36,000.00 4,000.00
3,000.00

32,000.00

Utilities Expense Salary Expense Accumulated Depreciation- Equipment Accumulated Depreciation- Furniture Salary Payable
2,000.00 5,000.00 500.00 600.00 5,000.00

Unearned Service Revenue Depreciation Expense- Equipment Depreciation Expense- Furniture Supplies Expense
9,000.00 500.00 600.00 2,000.00

3,000.00

6,000.00

Asset Method

Prepaid Rent Rent Expense

NOv. 1 45,000 30,000 Dec 31 Dec 31 30,000

15,000.00

Expense Method

Rent Expense Prepaid Rent

NOv 1 45,000 15,000 Dec 31 Dec 31, 15,000

30,000.00 15,000.00
 Jennny Light Accountant
UNADJUSTED TRIAL BALANCE
December 31 2000

DR CR

Cash 87,000.00
Accounts Receivable 11,000.00
Supplies 3,000.00
Equipment 30,000.00
Furniture 36,000.00
Accounts Payable 36,000.00
Unearned Service Revenue 9,000.00
Jenny Light, Capital 120,000.00
Jenny Light, Drawing 16,000.00
Service Revenue 25,000.00

Rent Expense 5,000.00

Utilities Expense 2,000.00
Salary Expense

Total 190,000.00 190,000.00

Adjusting Entries

Account Titles and Description Debit

a. Accounts Receivable 4,000.00

Service Revenue
to record accrued salary income for the month.

b. Unearned Service Revenue 3,000.00

Service Revenue
to record the earned portion of unearned service revenue collected Dec 21. (9,000/30 days x 1

c. Supplies Expense 2,000.00

Supplies
to record supplies used for the month.
(3000-1000=2000)

d. Depreciation Expense- Equipt. 500.00

Accumulated Depreciation- Equipment
To record the depreciation of equipment.
(30,000/5 years x 1month/12months)

e. Depreciation Expense - Furniture 600.00

Accumulated Depreciation- Furniture
To record the depreciation of furniture.
(36,000/5 yrsx 1 month/12 months)

f. Salaries Expense 5,000.00

Salaries Payable
Accrued salaries for the month.
f Salary Expense 5,000.00
Salary payable
 Credit

4,000.00

3,000.00
d Dec 21. (9,000/30 days x 10 days Dec 21-Dec 31)

2,000.00

500.00

600.00

5,000.00
5,000.00
 Jenny Light Accountant
Worksheet
December 31. 2000

UNADJUSTED TRIAL BALANCE ADJUSTMENTS ADJUSTED TRIAL BALANCE Income Statement Balance Sheet
DR CR DR CR DR CR DR CR DR CR

Cash 87,000.00 87,000.00 87,000.00

Accounts Receivable 11,000.00 4,000.00 15,000.00 15,000.00
Supplies 3,000.00 2,000.00 1,000.00 1,000.00
Equipment 30,000.00 30,000.00 30,000.00
Furniture 36,000.00 36,000.00 36,000.00
Accounts Payable 36,000.00 - 36,000.00 36,000.00
Unearned Service Revenue 9,000.00 3,000.00 6,000.00 6,000.00
Jenny Light, Capital 120,000.00 - 120,000.00 120,000.00
Jenny Light, Drawing 16,000.00 16,000.00 - 16,000.00
Service Revenue 25,000.00 4,000.00 29,000.00 32,000.00
3,000.00 3,000.00
Rent Expense 5,000.00 5,000.00 - 5,000.00
Utilities Expense 2,000.00 2,000.00 - 2,000.00
Salary Expense 5,000.00 5,000.00 5,000.00
- -
Total 190,000.00 190,000.00
- -
- -
Supplies Expense 2,000.00 2,000.00 2,000.00
Depreciation Exp- Equipt. 500.00 500.00 500.00
Depreciation Exp- Furniture 600.00 600.00 600.00
Accum. Depreciation - Equipt 500.00 500.00 500.00
Accum. Depreciation - Furniture 600.00 600.00 600.00
Salary payable 5,000.00 5,000.00 5,000.00
- -
- -
- -
15,100.00 15,100.00 200,100.00 200,100.00 15,100.00 32,000.00 185,000.00 168,100.00

16,900.00 16,900.00
32,000.00 32,000.00 185,000.00 185,000.00
 Jenny Light , Accountant
Income Statement
For the year ended December 31, 2007

Service Revenue 32,000.00

Less: OPERATING EXPENSES
Rent Expense 5,000.00
Utilities Expense 2,000.00
Salary Expense 5,000.00
Supplies Expense 2,000.00
Depreciation Exp- Equipt. 500.00
Depreciation Exp- Furniture 600.00
15,100.00

NET INCOME 16,900.00

 Jenny Light , Accountant
Balance Sheet
December 31, 2007

ASSETS

Current Assets
Cash 87,000.00
Accounts Receivable 15,000.00
Supplies 1,000.00

103,000.00

Non-current Assets
EQUIPMENT 30,000.00
Less: ACCUMULATED DEPRECIATION
EQUIPMENT 500.00 29,500.00
Furniture
Less: ACCUMULATED DEPRECIATION 36,000.00
Furniture 600.00 35,400.00

TOTAL ASSETS 167,900.00

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Accounts Payable 36,000.00
Unearned Service Revenue 6,000.00
Salary payable 5,000.00
47,000.00

Owner's Equity
James Cabrera, Capital 120,900.00
120,900.00

TOTAL LIABILITIES AND OWNER'S EQUITY 167,900.00

 Jenny Light , Accountant
Statement of Changes in Owner's Equity
31-Dec-07

Beginning Capital 120,000.00

Add: Income 16,900.00
Less: Drawings (16,000.00)

Ending Capital Dec 31 120,900.00