This comprehensive problem involving the Joan Miller Advertising Agency covers all the learning objectives in this chapter and in the chapters on measuring business transactions and measuring business income. To complete the problem, you may sometimes have to refer to this material.
The July 31, 20xx, post-closing trial balance for the Joan Miller Advertising Agency appears on the facing page. During August, the agency engaged in these transactions:
Joan Miller Advertising Agency
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Post-Closing Trial Balance
July 31, 20xx
Cash $ 9,140
Accounts Receivable 5,000
Art Supplies 1,300
Office Supplies 600
Prepaid Rent 800
Prepaid Insurance 880
Art Equipment 4200
Accumulated Depreciation, Art. 70 Office Equipment 3,000
Accumulated Depreciation, Office. 50
Accounts Payable 3,240
Unearned Art Fees 600
Wages Payable 360
Joan Miller, Capital 20,600
Aug. 1 Received an additional investment of cash from Joan Miller, $6,300.
2 Purchased additional office equipment with cash, $1,200.
5 Received art equipment transferred to the business from Joan Miller, $1,400.
6 Purchased additional office supplies with cash, $90.
7 Purchased additional art supplies on credit from Taylor Supply Company,
8 Completed the series of advertisements for Marsh Tire Company that began on July 31(see page 103) and billed Marsh Tire Company for the total services performed, including the accrued revenues (fees receivable) that had been recognized in an adjusting entry in July, $800.
9 Paid the secretary for two weeks’ wages, $1,200.
12 Paid the amount due to Morgan Equipment for the office equipment purchased last month, $1,500.
13 Accepted an advance in cash for artwork to be done for another agency,
14 Purchased a copier (office equipment) from Morgan Equipment for $2,100, paying $350 in cash and agreeing to pay the rest in equal payments over the next five months.
15 Performed advertising services and received a cash fee, $1,450.
16 Received payment on account from Ward Department Stores for services performed last month 2,800
Aug. 19 Paid amount due for the telephone bill that was received and recorded at the end of July, $140.
20 Performed advertising services for Ward Department Stores and agreed to accept payment next month, $3,200.
21 Performed art services for cash, $580.
22 Received and paid the utility bill for August, $220.
23 Paid the secretary for two weeks’ wages, $1,200.
26 Paid the rent for September in advance, $800.
27 Received the telephone bill for August, which is to be paid next month, $160.
30 Paid cash to Joan Miller as a withdrawal for personal expenses, $1,400.
REQUIRED ~ 1. Record entries in journal form and post to the ledger accounts the optional reversing entries on August 1 for Wages Payable and Accounts Receivable (see Adjustment g on page 101 and Adjustment i on page 103)(Begin the general journal on page 5) .
2. Record the transactions for August in journal form.
3. Post the August transactions to the ledger accounts.
4. Prepare a trial balance in the Trial Balance columns of a work sheet.
5. Prepare adjusting entries and complete the work sheet using the information below:
a. One month’s prepaid rent has expired, $800.
b. One month’s prepaid insurance has expired, $80.
c. An inventory of art supplies reveals $600 still on hand on August 31.
d. An inventory of office supplies reveals $410 still on hand on August 31.
e. Depreciation on art equipment for August is calculated to be $100.
£ Depredation on office equipment for August is calculated to be $100.
g. Art services performed for which payment had been received in advance totaled $1,300.
h. Advertising services performed that Will not be billed until. September total $290.
i. Three days’ wages had accrued by the end of August (assume a five-day week).
6. From the work sheet prepare an income statement, a statement of owner’s equity and a balance sheet.
7. Record the adjusting entries in journal form, and post them to the ledger accounts.
8. Record the closing entries in journal form, and post them to the ledger accounts.
9. Prepare a post-closing trial balance.