Task: Summative Evaluation: Midterm Assessment
• This is an assignment to be done individually.
• You must answer all the questions in the proposed problem.
• Submission file format: Word document with all the answers, clearly identifying all steps, results, journals, ledger accounts and including comments
Submission: Week 4 – Via Moodle (Turnitin). Deadline: 20 June 2021 at 23:59.
Weight: This task is a 40% of your total grade for this subject.
This task assesses the following learning outcomes:
• Understand how companies are created and how to register all business transactions in the main accounting books: The Journal and the Ledger.
• Understand how to prepare a company’s Trial Balance.
• Learning how to record adjusting entries at the end of each month and preparing and Adjusted Trial Balance.
• Understand how to record the closing entries to be able to close the company’s accounting books.
• Understand how to prepare the company’s financial statements: Balance Sheet, Income Statement and Statement of Retained Earnings.
• Acquire a thorough understanding of the company’s accounting cycle and the importance of all the procedures need to determine the company’s final
net income and its financial situation in the Balance Sheet.
Problem 1: Recording transactions in the journal, posting to T accounts and trial balance (30 points)
On February 20, Jane Doe began a new business called Doe Printing, which provides typing, duplicating, and printing services. The following six
transactions were completed by the business during February.
- Issued to Jane 1,000 shares of capital stock in exchange for her investment of $200,000 cash. (4 points)
- Purchased land and a small building for $550,000, paying $150,000 cash and signing a note payable for the balance. The land was worth
$240,000 and the building $310,000. (5 points)
- Purchased office equipment for $50,000 from Staples, Inc. Paid $18,000 cash and agreed to pay the balance within 60 days. (4 points)
- Purchased a motorcycle on credit for $3,500 to be used for making deliveries to customers and agreed to make payment to Spokes, Inc.
within 10 days. (4 points)
- Paid in full the account payable to Spokes, Inc. (4 points)
- Borrowed $40,000 from a bank and signed a note payable due in six months.
- Record the above transactions in general journal form. (18 points)
- Post the entries in the T accounts below. (12 points)
Problem 2: Recording adjusting entries (24 points)
Hollander Laboratory adjusts and closes its accounts at the end of each month. The trial balance on September 30, 2020, before
adjustments is as follows:
Accounts Receivable 27,000
Prepaid Rent 5,000
Office Supplies 1,200
Medical Equipment 21,800
Accumulated Depreciation: Medical
Accounts Payable 3,000
Notes Payable 8,000
Unearned Revenue 14,000
Capital Stock 18,000
Retained Earnings 16,000
Medical Revenue 31,000
Salaries Expense 14,000
Utilities Expense 2,000
Insurance Expense 5,800
Total $96,000 $96,000
The following information relates to month end adjustments:
(1) Office supplies consumed during September 30 amounted to $600.
(2) The useful life of the medical equipment was estimated to be 10 years.
(3) Many patients pay in advance for major medical procedures. Fees of $7,000 were earned during the month by performing procedures
patients who had paid in advance.
(4) Salaries earned by employees during the month but not yet recorded amounted to $2,500.
(5) On September 1 Hollander Laboratory paid $5,000 for 2 month’s rent in advance.
(6) Medical procedures performed during the month but not yet billed or recorded amounted to $8,600.
Instructions: Prepare the adjusting entries required at September 30. (4 points per entry)
Problem 3: Closing entries and preparing Financial Statements (46 points)
Funky Beat Studio provides music lessons to student musicians. Some students pay in advance for lessons; others are billed after lessons
have been already provided and the amounts are credited to “Lessons revenue”. The advanced payments are credited to an account
entitled “Unearned revenue”.
FUNKY BEAT STUDIO
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2020
Cash $ 20,800
Accounts receivable 2,100
Unexpired insurance 3,200
Prepaid rent 6,000
Sheet music supplies 450
Music Equipment 180,000
Accumulated depreciation: music equipment $ 72,000
Accounts payable 3,500
Notes payable 5,000
Dividend payable 1,000
Interest payable 25
Income taxes payable 3,400
Unearned revenue 1,100
Capital stock 20,000
Retained earnings 56,600
Lessons revenue 159,375
Advertising expense 7,400
Insurance expense 4,400
Rent expense 16,500
Sheet music supplies expense 780
Utilities expense 5,000
Depreciation expense: music equipment 33,000
Salaries expense 27,500
Interest expense 25
Income tax expense 13,845
Total $322,000 $322,000
From the adjusted trial balance dated December 31, 2020, provided above, complete the following:
- Prepare all the closing entries for the company. (12 points)
- Prepare the Income Statement dated 31/12/20. (10 points)
- Prepare a Statement of Retained Earnings dated 31/12/2020. (10 points)
- Prepare the company’s Balance Sheet dated 31/12/2020. (14 points)